I am 5'2.5" with a 28.5" inseam. My 46 cm Aegis Swift has a rather high bottom bracket, and as a result, I have very little standover (like 1/4"). It has never been a problem for me. The top tube is quite short (19.1") so it fits me perfect from that perspective - and that is probably the most important component of fit, as others have said. I have a 9 cm stem and 650c wheels and don't mind them one bit. I think they're cute. ;-) I have a small amount of toe overlap with them (I wear a size 7 shoe), so I would have a huge amount of toe overlap with a 700c front wheel - that's dangerous. So, that is something to consider when choosing between a 650c and a 700c bike. Since you have smaller feet, it may not be a problem for you.
Also, bike handling will be sacrificed the shorter your stem is. There is a reason that "stock" stems are 10cm. I have read that 9cm-11cm is good, and any shorter or longer can cause problems. I know I experienced some front-end twitchiness and difficulties climbing out of the saddle on my Terry Isis (44 cm frame), which came with a 6.5cm stem.
There are a lot of factors to keep in mind. I do agree with what several posters have said, though, that all things considered, a smaller frame is more desirable than a larger one, if you could potentially ride either. With a smaller frame, you can use a longer stem, for better handling. And, it's slightly lighter. 650c wheels are also lighter than 700s!
Just some random thoughts from past experience with small WSD road bikes...good luck, and let us know what you decide!
Emily
Emily
2011 Jamis Dakar XC "Toto" - Selle Italia Ldy Gel Flow
2007 Trek Pilot 5.0 WSD "Gloria" - Selle Italia Diva Gel Flow
2004 Bike Friday Petite Pocket Crusoe - Selle Italia Diva Gel Flow