I use small 3" wheels in my battery powered DeWalt DC550B cutoff tool. I also use rotary files in it to open up holes. The DeWalt is really a handy tool for quick work and no cord to drag out. The 550B uses either 1/4" or 1/8" collets, so it's versatile and easy to use.
I have a Foredom K.2272 tool with a 4' flexible drive to use with small wheels like a Dremel, but it has more power and the flexible shat allows me to get into really tight places and leave the drive motor out of the working area. I usually keep it hanging above my work bench with the drive cable down to keep it handy, and it gets more bench use than portable use, but when I need something really small it's the best. They're about $330 now, but well worth every penny.