I'm 5-1 and also ride on 700c wheels (48cm bike). I 've never had any issues with overlap. I tried out the 650c wheels on a 44cm road bike, but the whole bike frame/size was just too small for me, considering I have a longer torso.
(If I buy a tri bike next year, I will probably go with 650c wheels but tri geometry is a bit different than a road bike.)

I'd say go with how the overall bike fits your body and makes you the most comfortable.

Happy bike shopping!