26 inch wheels allow a variety of tire profiles, down to 25c (1") which is pretty narrow. If you go with 650c you are limited to 20 or 23mm widths (Terry's offered one Panaracer-made tire in something wider, but it isn't great quality, and it isn't necessarily always available). So narrow or really effing narrow. 650B may be a better option for you if you are wanting versatility. 650B is a larger diameter wheel than both 26" and 650c, but it offers more versatility in tire profiles. If you go 650B, however, you can't want a super narrow tire width. That's not what 650B is about.
The reason for going with the smaller wheel isn't exclusively about wanting to prevent toe overlap. When one is short but rides a bike with a larger wheel the front end is unnaturally high. For a lot of women who prefer an upright riding position this isn't a problem. But for those who want the kind of fit that results in ultimate efficiency and power transfer, it is indeed a compromise. A higher front end necessarily forces more weight on the back end of the bike.
In addition, going with a large wheel on a small frame means a very short head tube which can be hard on headsets. Not very compelling these days, but something to mention and add into the mix.



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