Hi JoHunter,
The toe clip overlap problem can be pretty bad on smaller frame bikes. I test rode a 47cm WSD Trek, a 48cm men's Cannondale, and a 47cm Bianchi Eros Donna, all with 700c tires and 170 cranks, and I found the overlap problem significant, significant enough to make me want to avoid it at all costs. Like you, I began to research the idea of retrofitting 650c wheel/tire combos, but was told that the brake setup would not work with the smaller wheels.

I'm 5' 4" and I have a shorter torso, and hence a bit of a reach problem. I need an effective top tube distance of 19.5-19.7 inches.

Eventually I began to research the possibility of a custom-built road bike, and became a regular visitor to the sites of Luna Cycles, Waterford, even Litespeed! Unfortunately, all of these great products were out of my reach money-wise. I'm a cycling newbie, and while I am wildly enthusiastic, some might say even obsessed, with the sport, I could not justify spending 3K plus on a new toy.

Finally, I stumbled upon the site for Rodriguez Cycles in Seattle. They make custom bikes for the hard-to-fit. They use 650c wheels on their smaller frames, and in addition, the women's road design has a more relaxed geometry than is typical - the top tube is sloping, the head tube is longer. I ended up ordering a custom bike from them, steel frame, 650c wheels, 165 cranks, and Campy setup for a little over 2K.

I received the bike this afternoon (waited by window all day for brown UPS van to appear), and I must say, it looks great! Because of all the rain in L.A. today, I was only able to ride it slowly, in circles, around our underground parking. Even with all the customization, there is still a bit of an overlap problem when I clip in to the pedals, but it is far less than it was with the other 700c/170 crank bikes. From my viewpoint in the saddle, it looks like 1cm of overlap, but that's a guess.

So in closing (I know, long post), I would like to say that I do not think that the toeclip-overlap problem can be entirely eradicated in a small-framed road bike design. If you talk to a builder, they'll sketch you a diagram of the bike, and show you the wheelbase and the angles that work, and then I think you just have to decide what you can live with. But smaller wheels and cranks do minimize the problem.

Good Luck with your search!

JCL