I have a Fuji 44cm frame with 700's and 165 cranks. I've been informed by various sources that the setup shouldn't work at all and that the angles are all weird to accomdate the larger wheels, but it fits me to a tee. I'm short with shorter torso and arms than legs. I used to have a bigger bike and can stand over a taller frame, but I really need the shorter top tube. I have no overlap problems at all- I do have small feet - size 4.5 road shoes. As far as the crank length goes - longer ones would mess up my knee position which is pretty darn perfect now, so even if it wouldn't cause overlap I wouldn't want to change it.

I haven't ever had a bike with 650's so I can't say that I know what the difference would be like. I've heard that smaller wheels climb better, but you end up having to spin faster to keep up on the flats. I've also heard that you can compensate with the gearing. I would love to take one for a test spin someday just to see which feels better to me.