Disclaimer - I do ride a 700c bike. HOWEVER, that's because I found a pre-owned one I fell in love with at the right price, I'm a smidge taller (5'4") and I can deal with toe overlap.

That said, I'm still looking lustfully at bike fridays... The Bike Friday folks actually have an interesting answer to the small wheels = slower idea. Take a look at http://www.bikefriday.com/LexiconFull.cfm?ID=53
Basically, their website says up to 16 mph, no difference. 16-33 mph - little difference. Above 33 - there's a difference.

I know that unless riding down a hill, I'm usually in the 16 and under category (or at least relatively close to it), so I'm not at all worried about the performance.

I've ridden with Emily and she dances up hills on her little purple bike (which is BEAUTIFUL)! Believe me, she was going faster than I was on my 700c bike. Methinks it's the engine, not the bike