I suppose it depends on what size, type and resolution of screen you're used to. From my experience though, don't worry, go for it
For several years I've been staring at 17" CRTs, and I was just as skeptical... I wanted portability more than anything (well, also the price difference to be honest!) but thought it'd be way too small after staring at a 17". Yet I got one and started using it at home and work (only a week ago, but still) and I've not even noticed that it's a small screen. If anything, I keep forgetting and thinking it's at least a 15"
(I believe flatscreens are a larger image than CRTs for the same measurements... something about CRTs being measured by the tube, not all of which is visible)
In fact I have the Powerbook sat here next to the iiyama 17" I normally use for the PC, currently acting as a second display on the PB. I keep moving windows across to the Powerbook's screen because it's a lot clearer and easier to look at. Seems the amazing clarity of the Powerbook's screen does a lot to make up for its small size... as I say, I've never really noticed its size and the CRT seems horrible to look at now in comparison.
That said, I have to be fair... even on the 17" I was most comfortable at 1024x768 so I'm looking at the exact same resolution on a nicer (albeit smaller) display. If you're used to higher resolutions (some PC users go to extremes) then maybe it would bother you. I've also only had the Powerbook for a week so I might be semi-consciously biased.
Having used it non-stop over the last week for both home (message boards etc) and work (typing, diagrams, design work etc) though, I've felt 100% comfortable using it for long periods. The only thing I needed to do was buy a Microsoft USB optical wheel mouse at a mere £12 because the scratchpad and single button were driving me nuts. The screen and keyboard though, are a delight, I could sit at it all day and not bat an eyelid.