Why would you like to use only part of your picture sensor all the time?
You can crop the picture easily in Photos App... or just pinch to zoom... BTW, iPhone photos, 5MPix or 8MPix, are much bigger than iPhone screens, which are way under 1MPix. iPhone photos are many, MANY times the full screen! (Standard 16:9 TV and PC monitor is 1920x1080 = 2,073 MPix, Apple displays are higher resolution.)
There are certain standards for photo sizes, 3:2 (35mm film and digital), 4:3 (consumer and mobilephone cameras), 1:1, ... whereas video standards are often 16:9 and old tv/video 4:3.
Movie theatres are showing 2,40:1 format, so perhaps this would be the best for the next iPhone screen size then ;-)
The question here is; how do you want to use your iPhone? Only for photo, or for video, or perhaps for internet... or to make phonecalls and send messages... Apple has a good compromise in screen size for most users.
Do you want to take wide-angle photos only? Someone else wants portraits of 4:3 or 1:1 format. Should there be specific iPhone model for each of us who are not able to crop their photos afterwards?
Well, a preset of picture format could be done easily, so stay tuned.