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I think there are probably quite a few people who use their phones to read ebooks - at least some of the time (I use my phone exclusively). There are certainly people who use both a dedicated device as well as one that is with them wherever they go...
The size of your image doesn't really need to dictate the type of format either. As far as I'm aware, most newer readers/apps have a function to zoom & pan on an image if the user wants to see it in more detail - usually by tapping on the image. The biggest reason I can see for a fixed format is if you have text that must always remain at a certain fixed position relative to the image. Otherwise normal text, with an accompanied image is easily handled with a reflowable format.
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