Smallest screen size without issues like scaling In the Android Compatibility Definition Document it says the support for smallest screen size is 2.5 inches diagonal but which aspect ratio is this for and what would be the smallest size be for 16:9 aspect ratio?
Also how small do you think apps can support before problems occur ?
Using the Screen size calculator, choosing 16:9 as the aspect ratio, and entering 2.5 inches as the diagonal give the result:

Width: 5.5 cm / 2.2 inches
Height: 3.1 cm / 1.2 inches



  Also how small do you think apps can support before problems occur ?


It depends on whether the apps' developers have coded them to Support different screen sizes or not. If they have not, then going below 2.5 inches will become problematic.