I did this 1.5 inch by 1.5 inch sign with a 0.0315 inch bit (0.8mm), I attached a photo with a dime for a size comparison.
The wood was some cheap plywood underlayment that had some defects and was 70% off at Home Depot (they keep a cart near the cutting area usually). The bit was $1.49 from here.
I just watched the talk the CEO of the Othermill did at the hackaday conference. It got me very interested in pressing this thing to its lower limits I want to see what we can achieve for 1/3rd-1/4th the price. I need to learn some PCB software or find something I can download and try a cut on a tiny level. You just inspired me to get dirty!