I just realized that...instead of 700c wheels, you could use 650c wheels and use the extra clearance for like fenders and/or bigger tires.

Anyone use them? I mean, I hear that 700c's only real advantage is at high racer speeds when the centrifugal force makes them efficient, but at lower speeds (ie most bicycling speeds), this is not hte case.

There is no "centrifugal force" advantage (or disadvantage). There is a slight aerodynamic advantage for smaller wheels and there's a slight rolling resistance disadvantage for them. Of course if you're using that size in order to fit wider tires then you lose the aero advantage - but both the advantage and disadvantage is very small for such a small change in wheel size.

My main concern would be about brakes - if you use rim brakes then they may not reach far enough with 650c rims. And also check for clearance issues with other parts of the frame - on some bikes the seat or chainstays bow in and may not let you run tires much wider even if you do switch to the 650 wheels. Also note the clearance height of the pedals at their lowest position. Going to smaller wheels would reduce this and might make it more likely that you hit the pedal when going around turns.

650s also help on smaller road frames, which can have toe clearance issues during turns. My next road bike is going to have them, or maybe even 559s.

Yeah there are a lot of problems with trying to put 650c wheels on a bike intended for 700c wheels, but if you can work out the clearance and brake issues you might like them. Remember your gearing will be lower (same gears lower development)

They're perfect for smaller bikes... I've always thought big bikes (60cm and above) should have their own wheel size too to keep things proportional.

The difference between 700 and 650c is too much to do a conversion. The brakes wont line up and the bottom bracket is dropped too much.
One conversion that does work is 700c to 650b. The advantage is a bit more room for wider tyres so your tyre diameter doesnt change much. You need longer drop brakes. 650b is midway between 700c and 26"mtb size.

650c have their uses, primarily in smaller road bikes.

You'd be going from a 622mm wheel diameter to a 571mm diameter (at the bead, not at the top of the rim.) That is a 51mm difference - about an inch. Can your brake pads slide down an extra inch? What about the fender fitting inside the brake caliper? Don't worry about if a fatter tire fits between your chainstays, because you won't find any fat 650c tires. For fat, you could go to 559 (mountain bike) wheels, but then the brake issue would be even worse.

In addition to the brake issue, you have to run bigger chainrings to get equivalent gearing and there are fewer tire choices. IMHO it's not a conversion you want to make.