The 13.3" Macbook Air is perfect form factor. As an aside, Apple is not going to make any laptops in the 12" factor.
Part of the "increase in size" is just pretend. Modern notebooks are not as large as their quoted screen sizes might imply. As 4x3 and 5x4 aspect displays have given ground to widescreen displays, display sizes of given diagonal measurement have dropped.
To wit: a 14" widescreen (16:10 or 16:9) is not as large (does not have as much area) as an old-fashioned 14" 4x3 screen, which in turn is not as large as an old-fasioned 5x4 screen. A modern 15.4" widescreen is about the same size, overall, as an old-fashioned 14" screen. Apple's current 13.3" Macbook has about the same screen size as did its old 12" notebook. It is only effectively "larger" for widescreen content that would produce black bars on the old 12" squarer screen.
More comparisions: a modern 22" widescreen is about the same size as an old-fashioned 5x4 19" screen. A modern 19" widescreen is about the same size as an old-fashioned 5x4 17" screen.
A netbook would be cool, but I doubt it would come cheap from Apple. They also tend to be a little think (proportionally), so if they made a netbook Air that would be amazing.