My understanding is that the current UCI rule which bans small-wheeled bikes (1.3.018) is a descendant of a rule specifically enacted to ban the Moulton. And not for safety reasons.
Anyhow, those small wheels are too ugly to be seen riding.
Meh. 17" wheels do great on the road.
So the physics is basically this.
DISADVANTAGES. Small wheels have a steeper angle of attack, so they're somewhat bumpier on tough surfaces. That's easily dealt with using a small full suspension to glue wheels to the road, just like it's done on motorcycles. Small wheels are more difficult to gear high. There are lots of common approaches to that. And small wheels often have more squirrely steering, because it's harder (not impossible) to give them a lot of mechanical trail. This in turn presents a problem for going downhill fast where steering stability matters. Last, of course, the tires wear out faster.
ADVANTAGES. Numerous. Small wheels are far more aerodynamic. They can be much lighter. They are far, far stronger and require fewer spokes. And they have much smaller rotational inertia, translating into faster acceleration and deceleration. Last, they allow for a much wider range of design options, including fairings. Large wheels are quite cumbersome in that regard.
Sure. http://www.ihpva.org/hpvarec3.htm [Also http://www.whpva.org/land.html ]
Search for "Moulton". Also has a few other records as well. In fact, IIRC, there is no upright bike with an IHPVA speed record on that page that is not a Moulton.
> Anyhow, those small wheels are too ugly to be seen riding.
That's what penny-farthing people used to say about your bike.
Though small-wheeled bikes have their own disadvantages (gearing challenges, mechanical trail), all other things equal, large-wheeled bikes are slow. UCI's restrictions have basically held back the industry. :-(