If you are planning to do any 'computing' on your umpc I wouldn't go smaller than 7". I have a 10" Eee PC and love it, It is a great portable pc and does just what I need it to do. I do think that it would be a bit big if I was using it primarily for reading. Do consider what else you will be doing with your umpc and how much screen space that will need. PDF files are traditionally set up for a "Letter" size page, so the closer you can get to that size the more enjoyable the reading experience will be. Some PDF files are saved as a series of picture or static pages which can not be 'reflowed' nicely and a larger screen will make it easier to read those files.
I have read on palm pilots and iPaqs and Dell PDAs and find that the small screens can get a bit annoying with all the extra page turns. I got really good at reading very small print in order to get as many words/page as I could. I thing that I would end up doing the same thing with a 4.5" screen. With a 7" screen you can find the font size that is easiest for you to read at the time; larger when more tired, smaller when in perfect reading conditions, etc. There is more flexibility with a slightly larger screen. Also it will be easier to read the eBook websites, and MobileRead, in 'full' rather than 'mobile' mode with a 7" screen.