Ok, now allow me to play Devil's Advocate (it's my job or something).
First, let me say that I agree with everything Troy Newman said. Yes, that could signal the coming of the apocalypse, so prepare.
And the answer to your original question: it depends. Mainy on where you are and how serious those around you are. When I flew sportsman, I flew with a scratch built 2 meter plane. I am convinced to this day anything less and I would have never gotten a first place, flying skill and practice be damned. It's the ugly truth, and we all hate it, but it is what it is. If you pratcice 10 times as hard as the next guy, and he shows up with a full tilt 2 meter, your chances are 50/50 and he'd better beat himself. A properly trimemd 2 meter will put the judges to sleep in sportsman, all you have to do is control your line better than the next guy and you win. Fly straight and smooth, round circular radiuses and loop segments, keep it on a relatively constant line in front of you and between the poles, and the guy with the smaller plane is dead meat. In MOST CASES, I have seen numerous exceptions, so this is not a blanket assumption.
A few years ago when I started out, sportsman was the hottest contested class in the southeast with the occasional exception of masters. Out of 10 people (average), at least 6 had 2 meter planes and knew how to fly them. They usually placed 1-6. Lately this trend has subsided somewhat, but it comes in waves. At one contest you better have a 2 meter, at the next one a Kaos will win every round. So the answer to your original question is that it varies from contest to contest. But there are a lot of SERIOUS sportsman competitors out there who aren't afraid to spend the dollar and do the work do gain every advantage they can. It is competition after all.
And you won't look silly with a lesser plane, you'll look like a sportsman. Believe me, chances are someone will look much worse than you. Especially if there's a crosswind
You can be competetive and have plenty of fun and learn TONS with a smaller plane, just don't expect to win every contest, or even have a shot at it. The always applicable exception is that IF you burn enough fuel, get the right coaching and fly VERY good, you'll most likely bring home a trophy, possibly even win if you're well practiced enough. But it takes more work with a smaller plane, that's the part you must understand.
I hope I haven't discouraged you, because that's not my intent. My intent is to cut through the standard propoganda and give you the truth. It's a question of expectation, and you will be much happier if you know what to expect. Expect to have the time of your life, watch your flying skill triple in one weekend, meet some of the coolest people in the world, and LEARN how to fly in a precision manner. If that's what you want, and you should, then you can do that with a 40 sized Kaos. Just understand that the better your plane, the better your shot at the #1 trophy. Keep it in perspective, but above all else, just DO IT!!!!!!!
The reason for my angle on this is that I lost count of how many contests I've been to where a guy showed up with a kaos, and everyone had told him how he could win sportsman with a Kaos (you should know that standard line by now) and then he gets his tail handed to him on a plate by a guy with a ZN Supreme....in sportsman. Then he gets upset because he was mislead, gets discouraged and quits. Not because he didn't win, but because he was not prepared for the reality of pattern: fierce competition at every level, even beginner's class.
That's all, I have some building to do. Get what you can get and then go practice. Then make it a POINT to go compete with this in mind, and I promise you'll have the time of your life and be hooked.
-Mike