I've had a 4.3" screen phone since June 2010 and have been using one to do my reading. Same reasons you list, plus I adjust fonts to match the typeface and size common to my favorite paperbacks. I prefer a light goldenrod background to ease the eyes.
I highly recommend the Mantano Reader app.
You can enjoy Project Gutenberg
with all features working by entering that link as one of your feeds. (m dot gutenberg dot org)