Interesting one Rosy. i also love the idea of views, etc, but think sometimes with kids maybe it can be a bit TOO isolated - they may not have local kids to play with which can remove some of the sense of community I think. Also, when they're secondary age getting to and from school and activities could be a problem, and as they reach older teenage it could be a nightmare!
We've just moved to a small town by the sea which I love love love...being by the sea is enough 'country' to keep me going, and at the same time we can walk 5 mins to the High St for the library, health clinic, and local shops. Schools are also 5 mins away, and the secondary school is only 10 mins or so.
Funnily enough I feel there is so much more for us here than there was in the big city we moved from - we lived a drive away from everything, and half the time I gave up on going to the library or whatever as you had to park, didn't have any money to pay, no spaces, etc etc....
I think a very small town is a really good place for younger to middling kids actually, I love it and wouldn't go back to city life.