Personal preference, eye strain, and a number of other things will impact the decision on screen size. I think it's a great size for a laptop, bigger than a netbook (certainly more powerful too!) but small enough that you won't mind carrying it to class.
If it's your only computer I'd recommend putting a little extra money into the 11.6", upgrading to 128GB would help as you would inevitably be putting stuff like music on there. 4GB memory is never a bad choice if you can spare the $100, as right now you can't upgrade the RAM after purchase. Upgrading the processor would be lowest priority for me as a hypothetical student, personally.
You can definitely make a case for all the upgrades to the 11.6"; basically, if you can afford it then down the road you'll probably be glad you got the upgrades.