This is a good article on the Moulton small wheel philosophy. Well, part philosophy, part science...

http://www.users.globalnet.co.uk/~hadland/page15.html

The end conclusion? Suspended, tuned bikes with the right tire pressure on smooth road conditions will outperform large wheels. Otherwise, large wheels have an advantage due to lower rolling resistance. I think I understand the concept now; pebbles, etc., tend to push back on tires with a smaller contact patch and higher pressure. Kind of the way that 1970s skateboard throw you off if you hit a pebble because the wheels are so hard. Softer wheels deform around rough surfaces, so there is no push back.

Thus, if you are on a rough surface, you will go faster with larger smooshy tires. If you are on a hard, smooth surface, you will go faster with hard, small tires b/c there is less deformity.