I think, and this is just my uneducated opinion, that it likely depends on your intended audience for the site.
For a site that is geared toward graphic designers-likely computer savy people-designing for larger screen sizes is not only ok, but it some cases preferable.
However, some sites are geared more towards a less computer-savy community. In this situation designing for larger screen sizes would be counter productive. Designing for 800, or even 640, might actually be more beneficial.
I only say all this because I have many older friends that find my computer screen size to small to see. They keep theirs at 800x600, and yes, I have a couple that even use 640x480. Designing a site that I wanted them to be able to view would require me to adjust accordingly.
Later.