Of course there are applications were you want to go really low-power/extra-small, but in that case even a micro-controller capable of running Contiki OS is too big. What I want to say is, that the application space where you can't deploy a small machine with Linux on it BUT it is feasable to have a small machine with Contiki on it is pretty narrow.
Anecdote: I learned about another project where they studied opossums. They put a collar with a small wireless device around their necks to track their movements and habits, but couldn't understand why a disproportionate amount of opossums died for some reason.... The reason was that the device had a small red LED that would blink to indicate that it was working, and the opossum, being a nocturnal animal became quite visible in the night, to the joy of all predators :) :S
This is getting OT, but sensor network applications and discussions often neglect the problem of device recovery and I know there are projects were sensors are not recovered and after they did their work (sensing stuff and sending it to a post-processing node) they go out of energy and become ... highly toxic waste.