Now, I'm not an expert photographer, but I am a computer programmer. The physical size of the sensor doesn't have a bearing on the digital data you get out of it except insofar as you hit the physical limit of each pixel sensor's width for a given resolution. In other words, a 10mp 35mm sensor is going to provide no more resolution than a 10mp APS sized one, indeed it will look exactly the same to the software (unless it has a different hight/width ratio).

Since people are already packing 10mp on what seem to be smaller sensors still (camera phones for example), what actually is the purpose of going to the 35mm format except for comforting people who are used to that size? Surely the next development will be APS with > 10mp?

I do believe there is a theoretical limit where the individual pixel sensor is too small to accurately pick up colour, but again we can't have arrived there yet or the smaller sensors would already be producing inaccurate results.