That was really long, long ago, when 120 was the typical camera. However, 35mm in the past are 35mm today and APS-C is even a smaller format. At the beginning of digital the cameras have to be big because one could not miniaturize things enough to fit everything in a small body. Things have changed and today there is no technical reason for not building a small full format camera as Leica has done.Yes, but let's not forget that 35mm was considered a compact size at one point, with 120 being the more typical camera.
Agreed. I believe there is as much a niche for small form dSLR as there are other camera niches such as the fixed lens compacts and mirrorless interchangeable cameras. While the LX3 and E-P1 are amazing little cameras and quite capable, I prefer the dSLR in many situations.I guess it is a relative thing, if you are Hulk Hogan you may have a different view than Tom Thumb about size. That being said, for me, a small camera is any camera that you can comfortably hand hold and a compact camera is one that fits into a pocket. To me the D5000 is a small camera.
Of course I am only one of many and in the end it really should be how you feel about the camera.