Hi,
I chose 0.5mm because it was adequate for SOIC packages (0.6mm between pads) and SOT89's say but you are right for SOT23's etc I use
pointy engraving bits. I have made boards quite successfully using TSSOP ICs, (0.2mm between pads) using engraving bits.

I can squeeze a trace between the legs of a DIP IC (with 0.5mm)....just....and I have to reduce the trace width through the gap down to 0.2mm, doable but
not ideal.

The smallest endmill I have used is 0.4mm. They are very tender and I broke a few before I got the hang of it. I then got a whole bunch (30) of the
Tycom 0.5mm endmills for only $2.65 USD each. I have got the method down pretty good now and so perhaps the next time I get some more micro tools from Drillman
I might try some 0.3mm's or 0.2mm's

Certainly the 0.5mm tools last long enough and give a really good finish cut that I consider it to be worth the extra care/cost. If I require finer features
(less than 0.6) the engraving bits work OK. I suspect that the extra care/cost of 0.2mm endmills say is probably not worth it.

Craig