Re: I won't be getting an iPhone SE... but a 4-inch iPhone 7 is oddly compelling
I think it could be great. The iPhone SE might be using an A9 chip, and performs similarly to the 6S, but it does have some compromises. While some people do like small, compact, powerful devices, they might not be a huge fan of buying a brand new phone that looks almost exactly like a 3 year old phone. The 1st-gen Touch ID, the same display as the 5S which isn't as nice as the 6/6S, the lack of 4G+/LTE-A/Cat 6 LTE, that 1.2MP front facing camera, no 3D Touch (i use it mostly for text editing) and Taptic Engine, and a few other smaller differences.
A 4-inch iPhone 7 without major compromises over the larger iPhones (i don't mind it being thicker to house the components), could be great for people who love that arm-liberating one-handed goodness, and still want the best iPhone that Apple can make. The iPhone SE is a nice upgrade from the 5S but it is still far from the best 4-inch iPhone that Apple can make (perhaps due to price constrains and hardware design limitations).
I think the 4-inch iPhone 7 wouldn't be out of place too. With better specs, it could be priced higher than the iPhone SE while being cheaper than the regular iPhone 7. They could phase out the iPhone 6, and then just have a 2 line-up of small, medium, and large phones - iPhone SE, 6S, 6S Plus, and iPhone 7 Mini, 7, 7 Plus.
It would be even better if they can push the price of the SE slightly lower. This would give people a really "budget" device that A LOT of people will be able to afford, and importantly one that also supports Apple Pay, allowing more people to utilise the service. Samsung has their mid-range Galaxy A5 that supports Samsung Pay, and I think Apple needs a device at that price range too to push for a wider adoption.
(Plus, no need for a weird name like iPhone SE 2 for the next compact phone. Making the iPhone SE truly a "Special Edition" device that helps Apple transition over to a line-up with 3 sizes for consumers to choose from each year going forward.)