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I would go with the Macbook. For me, the ability to use OSX is well worth the extra $100.
Also, my sister recently got a macbook, and the screen doesn't seem small at all. And this is coming from the owner of a 24" iMac. You can use spaces (http://www.apple.com/macosx/features/spaces.html), a feature in OSX Leopard, to get around the screen space issue as well.