It's not the absolute smallest phone on Verizon but geez they need a little space to fit in that 176 x 220 internal color display, a VGA camera, a spacious keypad and an external color display too.
No mention was made of the FaceTime call resolution, but given the fact that the front camera is merely VGA, it's probably streaming at the same 640 x 480 that Qik is constrained to in the free service.