Cameraphones are encroaching more and more on the consumer digital stills market, where many potential buyers would rather opt for convenience and portability over outright IQ. I don't know how close we are to the IQ ceiling on full-frame digital, perhaps others could comment...
A larger format could offer better low light capability, better background blur and a smaller diffraction limited aperture. For landscape and and portrait work these could all be put to good use. In terms of ergonomics sure you'd need to use longer focal lengths on a larger format but perhaps "DO" lens designs (which offer reduced size and weight) could be employed? Anyway, since this is supposedly "The Year of the Lens" maybe all Canon's new lenses will be forwards-compatible to a larger sensor size... perhaps an "XL" line of lenses.
On a theoretical 48x36mm (0.7x Crop) sensor: (Doubled FF sensor size)
1) SNR could be 41% better than equivalent full frame tech.
2) Angle of view - TS-E 24mm would be similar to 17mm on full frame
3) Background rendering - 135mm f/1.8 would be similar to 85mm f/1.2 on full-frame.
4) Diffraction limit would be extended by 1 stop. (e.g. f/14 vs f/11)
On a theoretical 5x7cm (0.5x Crop) sensor: (Quadrupled FF sensor size)
1) SNR could be 100% better than equivalent FF tech.
2) Angle of view - 30mm "XL" would be similar to 15mm on FF
3) Background rendering - 200mm f/2.8 would be similar to 85mm f/1.2 on FF.
4) Diffraction limit would be extended by 2 stops. (e.g. f/22 vs f/11)
http://howmuchblur.com/#compare-1x-85mm-f1.2-and-0.7x-135mm-f1.8-and-0.5x-200mm-f2.8-on-a-0.9m-wide-subject
How significant these advantages are is up to debate...