Would A5/1 with a much larger state be a good choice of stream cipher for hardware? Would A5/1 with a much larger state be a good choice of stream cipher for hardware?  Assume that a reasonable choice of MAC is made such as GMAC, with the first 128 bits of the stream cipher output used as $H$ and the next 128 bits used to encrypt the auth tag.
I have argued so 15 years ago, and not been proven wrong since. Basically, A5/1, with a $n$-bit state, offers a resistance of roughly $2n/3$ bits of security. With $n = 64$, the resistance is very low, thus amenable to not only direct breaking, but also all kinds of trade-offs.

All the attacks published so far are dances around that resistance level of about 43 bits, the point being to make it so that actual instances can be broken "in real time": a 43-bit brute force can be done in relatively little time with a modern PC (in a matter of hours), but if you want to indulge in actual GSM spying you need a much faster break so that you can follow the target phone while it hops frequencies. Various methods have been proposed, that combine some possibly large precomputations with a wait for the algorithm to be in a state that is part of that precomputation; this is the idea in the original attack by Biryukov, Shamir and Wagner. Depending on the writing skills of whoever describes an attack, it is often possible to play between elementary operations, bit operations, CPU opcodes and other measures to get the complexity figure as low as possible, e.g. down to $2^{40}$ for A5/1, but that's just marketing.

At its core, there is always the brute force on the clocking sequence: you need to guess two clocking bits, one way or another, to inject one bit of known output.

As such, an A5/1-like design boosted to a 192-bit internal state ought to offer a resistance of about "128 bits" and, to my knowledge, would not be substantially broken -- as far as we know. One might need to expand the size a bit (say, to 210 bits) to avoid academic trickeries resulting in attacks in cost $2^{126.3}$ or similar nitpicking. How many "blank rounds" should be run after injecting the key is an open question (the original A5/1 runs 100 blank rounds).

Though an "extended A5/1" would be implementable in hardware with very few gates, it would not have been extensively reviewed, and experience shows that extensive review is not optional in the design of cryptographic algorithms. As such, it cannot be recommended "as is". I suggest that you consider instead using one of the eSTREAM portfolio algorithms, especially those that follow the "hardware profile". In particular, MICKEY 2.0 has a variant with a 128-bit key.