The limiting factor for that is currently the more recent iPhone SE 3 (2022), so that argument isn't convincing. Regarding screen size, the Display Zoom resolution of the Pro Max is the same as the iPhone mini resolution, and the Display Zoom resolution of the Pro is the same as the Display Zoom resolution of the mini [0], so dropping the mini didn't actually remove any supported resolution. What's true is that the hardware design and layout is more constrained for the mini size, mostly regarding battery capacity, but I don't really see a limitation for the software. Even regarding battery capacity, the 16e has really great battery life, so a mini using similar tech should still be acceptable.

[0] https://www.ricsantos.net/2021/01/21/ios-device-resolution-g...