Digital Cube says that their i-Station G43 is the smallest UMPC available, and the - apparently - french guy doing the interview not only believes them, but he seems to be wetting his pants with the excitement of it all in this video. I don't know if I would be excited about the prospect of running Windows XP on a AMD Geode LX800 processor with 256MB of RAM, but hey, whatever rocks your world.
In any case, this UMPC runs a full Windows on its 4.3 inch 800-pixel wide screen, and comes with up to 60 GBytes hard drive, Wi-Fi, Bluetooth and a USB Host port. All for only $700, including the XP license, which Digital Cube says you can then trash and install Linux.
Digital Cube G43 [Cebitvideo]