Box2D no longer needs screen bounds when creating a world, so it can be as big as you like.
Whether you'll want to use a physics engine such as Box2D or Chipmunk depends entirely on the game you're developing and your design choices.
If, for example, you want a game with lots of physical interaction between objects, with joints, forces, contact points and so on, it would make sense to use box2d/chipmunk rather than code your own physics engine.
If, on the other hand, you're doing a platform game which only needs collision check and a basic collisions response (don't go through wall/platform), you might be better off using your own algorithms or a more simple solution, such as the CCPhysics class that has been recently posted here on the forums.
I suggest you have a look at the manuals for each API to understand all the features that they offer and also run the testbed projects that come with cocos2d.