We've seen digital photo frames with 1.5 inch screens before but this one is locally available and offers decent features.
The Kaiser Baas Digital Photo Key Ring can store up to 70 pictures (jpeg or bmp) that present in a slideshow on the LCD display. The included USB cable is used to upload the images as well as recharge the internal battery, which lasts around 10 hours. The whole thing measures four by six centimetres and is only compatible with Windows. Don't know about the somewhat conspicuous branding though, kinda takes away from the otherwise clean and stylish design.