I am developing app for both 3.5 and 4 inch screens. However, suddenly on the simulator the screen size became 320 * 480 even when I am running 4-inch iPhone simulator.
About default applications created in Xcode 6.0, try this:
Project properties -> App Icons and Launch Images -> Launch Image Source -> Use Asset Catalog -> Images, Migrate
After this project will be displayed correctly on 4-inch iOS 7 devices.
Please check that you have Default-h568 file in the project for iPhone 4inches.