Several friends have responded this weekend saying...
"Jim, I have been following with interest your story about small diameter logs and the birch flooring example.  However, I think that you need to include your expenses, especially the cost of transportation and milling the flooring, into the
story for an accurate picture.  Best wishes"  George

O.K.  Since you asked!

First I must acknowledge that we didn't invent this idea of using small logs for flooring here at Timbergreen....  I stole the idea!  Two pallet manufacturers  figured this out after watching thousands of board feet of beautiful lumber    going right into the pallet piece pile - and out the door - for 35 cents a board foot.  A fellow in Minnesota, and a crew here in Wisconsin both came to the same conclusions.  Thanks guys!  See you around....

Two articles on our website - http://www.timbergreenforestry.com/page24.html and http://www.timbergreenforestry.com/page50.html cover this too, but I will bring the figures right up to date here with actual results from the Timbergreen Trials (some of the stuff on the web is two-four years old... watch out!).
The first change is that we now see that logs 6" and 7" diameter on the small end (pulpwood!) can produce excellent flooring where our previous minimum size for sawbolts was 8" diameter. 
This is a huge improvement in utilization!

When hardwood sawbolts are processed to make flooring:
We have shown that 2 cords of sawbolts will produce about 1,500 bf of lumber using band sawmills
Forest management costs are                  $40/mbf                (been there....)
Logging costs are                                      $80/mbf for the lumber produced Trucking to local processing facility        $30/mbf                    (for sure!!)
Sawmilling with Scragg and resaw        $200/mbf  (we come close!)
Defecting and sorting boards                    $ 50/mbf    (a little extra just in case)
Kiln drying                                                $200/mbf    (generous as usual)
Milling Tongue and Groove                    $400/mbf    (actual cost at Feltz Mfg)
Total cost of processing 2 cords sawbolts =  $1,000/mbf  (done that...)
Estimated loss to trim and milling - 20%
Actual cost of producing 1,000 sqft flooring  $1,250/msf  (not bad!)
Storage and marketing costs                            $500/msf  (adequate)
Value of rustic flooring                                    $3,350/msf  (you bet!)
Value of rustic flooring installed                      $8,000/msf  (Wow)

These long term costs assume that you have a basic processing facility equipped to handle this material in the local community.