You missed one other possibility and that's structural components. If any of the parts of the device can be part of the hardened envelope then you lose less space.

For instance, a thinner PCB bonded to or traced onto the inside of the case. Or look at the research in automotive circles for batteries that can support a physical load.

And also one of my peeves about Apple phones is that the chassis is so strong that you don't need a cover, but only a few people I know don't use a case, so phone plus case is heavier.

I'd like to see someone build a phone that HAS to have a case, and comes with one, which you can replace. You could do the same with the modular design and then you wouldn't have to make individual pieces bomb proof.

It's not that I don't think it's inevitable that the project was cancelled now. I'm just thinking in ten years when some of this is sorted out and we have no reason to keep making phones smaller, this plan might come back again. It's just another project that came out before its time.