I mentioned a long time ago that I have tweaked Windows 7 to my own preferences - the taskbar is 2 or 3 rows high, but I don't combine and I never hide labels. And until recently, I always used small icons. But while preparing both my Tech Ed Europe talk and my launch party demo, it annoyed me that I didn't get the icon overlays. These are incredibly helpful - better than icons in the system tray, balloon tips, focus stealing popups, toast, or other notification techniques. I mentioned to someone that I got them maybe once when I first installed, but never again since. Then just as I said that, I had a thought. A quick search confirmed it - you don't get overlays if you have small icons. And overlays are so useful, I've switched to large icons so I can have them. Not just while demoing, but for my regular life.
In the top row I don't have any new mail and I'm available on Messenger. In the middle row, new mail has come in so the Outlook 2010 icon has an overlay. In the bottom row, I'm away on Messenger. It's a very compact way to present notifications. So from now on, large icons for me!