Funny, I kept thinking that a small wheel would be the greatest thing for a utility bike since
(1) Just like an ERTO 559 wheel is ~11% stronger than an ERTO 622 wheel, a 20" -- generally ERTO 406 -- will be much stronger. Oh ... if you don't believe me, take a peek at Brandt's book or Peter White's website.
(2) When loaded -- particularly the front -- the twitchier/faster steering of the small wheel is a perk in my experience. It makes the steering more "normal" if that makes any sense. And yes, one can adjust oneself to the smaller wheels -- it usually takes a 5 minute ride to get 90% of the "adjustment".
(3) Really easy to get low gears due to those very same small wheels. Of course, this means that you will have a harder time gettng really high gears. But this should be less of a concern with a utility bike.
(4) My understanding -- I am no physicist nor an engineer, so this is rejurgitating something from other sources -- that the small wheels result in less torque on internal hubs. So if you are worried about achieving super low gears with an internal hub -- say like the Alfine or I-Motion -- you can push the limits with smaller wheels relative to larger wheels with less worry.
(5) ERTO 406 stil has a good selection of tires. For instance, you can get Schwalbe Big Apples (50 mm) in the size.
Mind you, I have a bit of experience with folding bikes; so clearly my opinion has some bias. Anecdotally speaking, you probably do not want to extrapolate the behavior of small wheels from multi-mode folding bikes which often trade off comfort and rideability for compactness -- the geometry of these bikes are a bit weird but will still get you from point A to B.