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D50 = Legendary. That there are so many still going strong proves just that.
How small is 'small', out of interest? If you want to change systems the Olympus Four Thirds kit is pretty compact. If you can live without a DSLR there are some incredible compact cameras about with APS-C size sensors, I'm seriously considering a Fuji X100 for everything but motorsport photography, the size means I could take it everywhere.
Yup, I love the creativity required of a prime and having something that capable in my pocket all the time just blows my mind. Considering how much I use my iPhone for pics when out and about as I can't be bothered to carry my D90 about I think it will be perfect. As another plus, it's bound to have Apple-like residuals so isn't too much of a risky purchase.