I don't understand the need for a home button if the new SE is going to have Face ID. Surely if this is to replace a small form factor phone that people want, then it would make more sense to remove that in order to reduce the size of the phone - making it more appealing to those people who don't want a large phone in their pocket.
At the expected price of 399$ there is no way it will have Face ID. It would simply be a recycled iPhone 8, just as iPhone SE was compared to iPhone 5-5S. So the smallest modern iPhone in 2020 will most likely be the rumoured iPhone 12 5.4”, followed up by this budget spring iPhone SE2/9 model and then 6.1” and larger. People will simply get used to it and let’s not forget that if Apple sensed a good market opportunity of resurrecting 4” iPhones, they would happily do it. Unfortunately for iPhone 5-SE fans, they are in a very small minority for Apple to care about.