For that price range, unless you're buying used the smallest you'll get is a 14.1" screen, which is still pretty portable (in which case you should look at the Vostro 1400, which starts at $450:
http://www.dell.com/content/products...tab=bundlestab )
Once you go smaller than 14.1, you step down to the 13.3" widescreen models, which I haven't seen (new) for less than about $750. You might find some older 12" models, but they'll be pretty slow. If you're up for used or refurbs, have a look for Latitude D410, D420 or D430s or Lenovo X40, X41, X60 or X61. All of those have 12" screens.