Thanks everyone. I was out of town for the weekend so I didn't respond to your answers. I would like to comment about a couple of things. The bike shop I went to is a small shop in a small town but the owner seemed very knowledable. He only had 5 road bikes in his shop and they were all larger. The smallest he had was a 56cm frame - he set it up in a trainer for me but did not take any measurements - he just stood back and had me peddle for a short time. He did say if I ordered a bike and it didn't fit me right I wouldn't have to buy it.
I certainly don't doubt when people say I should go smaller. I just don't understand. I can't imagine going smaller than my Terry. While sitting on it today, I tried Big Reds measuring my elbow against the seat suggestion above and my finger tips are 2.5 cm from the bars. I dropped a line from my knee when it was in line with the crank and it falls almost 2" past the pedal spindle. When my knees are at the top of their stroke, they come within a couple of inches of the stem. My saddle is set as far back as it will go. Doesn't that seem too small? Maybe the geometry has changed quite a bit since the late 80's when my Terry was made.
Thanks for everyones input!
Kim