I tried going one size down in settings and while it does make the system UI better (more space for notifications etc) the majority of apps get unusable - everything is too small and hard to read, plus UI elements are closely packed to be clickable with fat fingers.
I'm hoping that some apps adjust and start responding to the lower scale in a way that still makes it usable but maybe that can't be done and I'm stuck with the ridiculous UI.
If you configure the setting to be small enough many apps will detect your phone as a tablet, though, leading to some funky tablet layouts. Your mileage may vary, but for me everything works out great.