While the home button can theoretically (but unlikely) be changed to a different shape (or color for that matters), the size of the screen are fixed due to space constraint. You have nailed the reason for that: fitting the Nutube into N8 requires a lot of consideration. Let's examine the dimension in more detail.
The tentative dimension of N8 is 128mm x 70mm x 20mm (LxWxH), the Nutube required 46.7mm x 17mm x 6.2mm (excluding the pins), and it will sit on 1mm above the PCB. the 7.2mm (6.2mm + 1mm) "thickness" requirement has ruled out the option to put the screen on top of the Nutube, and right now, if you look at the N8 photo carefully, you'll notice that the screen are installed immediately above the Nutube. that is the reason why we can't use a bigger (or longer) screen in N8.
To install a bigger screen, we have to overlap the screen "over" the Nutube. Assuming we can resolve the heat dispenser problem, this will require a dramatic increase in thickness of N8.
On the other hand, while the screen might looks small on the overall N8 form factor, the important issue is to make sure it function as a display and control (touch screen) of a DAP effectively.we can comment on that when I publish the final version of UI design, but I fairly happy with what we have right now, and I hope most, if not all, N8 users will agree with me eventually.