Now here's a new angle which I had previously not given much thought to. Many people expected Canon's follow-up to the D30 would be a full frame 6MP (or more) and were disappointed the D60 retained the the 1.6 multiplier.
It has always seemed to me the advantages of the smaller sensor (within reason) outweighs the disadvantages. The cropping factor not only provides for a greater telescopic effect, but effectively upgrades virtually any lens by cropping out the edges and corners where performance invariably falls off to some degree. And as BJL has suggested, the lack of wide angle capability can be remedied by the acquisition of just one ultra wide angle lens such as the Canon 16-35 or Sigma 15-30. Furthermore, if the performance of such wide angle lenses tends to be even worse than that of most lenses at the corners and edges, then that is also taken care of by the cropping factor. One is on a winner whichever way you look at it.
However, there's another angle to this. Let's compare a D60 size pixel (about 7.5 microns) with the size of pixel you would get if the sensor were full frame 6MP - about 12 micron pitch. Let's assume that both pixels, because of different technologies, fabrication, whatever, are of equal value in terms of DR, S/N, colour accuracy and so on. Does the 6MP full frame sensor then have any qualitative advantage, apart from it's wider angle capability?
Well, it seems to me it does. As BJL has pointed out, the performance of the smaller sensor is dependent on the performance of the lens at aprrox. 60 lp/mm as opposed to 40 lp/mm. Not only that, but its performance at 30lp/mm as opposed to 20 lp/mm, its performance at 15 lp/mm as opposed to 10 lp/mm and so on.
Look at any MTF graph of any lens and you'll see two broad shifts in performance. One is towards lower contrast at the corners (or edge of the image circle), indicated by the curve dipping towards the bottom right of the graph, and the other is towards lower contrast at the specified higher resolutions (indicated by the different curves being lower down the vertical axis). The loss of contrast at 40 lp/mm is invariably greater than the loss of contrast at 30 lp/mm, and so on.
What is the impact of these lens effects on the larger sensor? Seems to me, a more contrasty image and, in so far as contrast relates to perceived sharpness, a sharper image - with the exception of the corners and edges.
Can the more expensive lenses achieve a performance at, say, 20 lp/mm in the area between 15mm and 20mm from the centre of the image, that is equal to or better than the performance at 30 lp/mm but closer to the centre?
Difficult to judge from MTF curves alone, mainly because there's often such a wide variance between diagonal (sagital) resolution and tangential resolution. Generally, I'd have to say that, if evenness of performance from edge to edge is the criterion, the smaller format sensor with the bigger lens is the winner. On the other hand, the centre of interest in most photos is probably away from the edges and therefore loss of contrast and perceived sharpness in these areas may be of little consequence, in which case the bigger pixel of equal quality is the winner (all else being equal).
One final point; we expect larger pixels to have a higher performance. I've just compared two different sized pixels of equal performance. The D60 pixels appear to me to be on a par with the 1Ds pixels, the advantage of the 1Ds being that it has more of them. But these pixels don't differ greatly in size. The pixel pitch of a full frame 6MP sensor should be significantly larger and should therefore have significantly higher DR and S/N. Combine this with the advantages I've outlined above and - all else being equal, except the price!! - the full frame 6MP sensor should win hands down.