The Polo is too old, the Yaris and Jazz too boring, the Peugeot and Clio too ugly (apart from the Clio 197)... I like the Swift and Punto though.
To call the Jazz boring means that you haven't driven a 1.5 Jazz (or even a 1.3 or 1.4 one) down a mountainside any time in the past two years. Terrific balance, that little car. Drives like an electric go-kart. The Yaris
could be nearly as much fun... but the suspension tuning and even worse steering just kill it for me.
The Swift is really nice, much better steering than either, but it's utterly impractical, with no rear seat space to speak of.
A secondhand manual tranny Honda Jazz is on my list of toys to buy in two or three years. I'd love to get this one I drove a few months back... HKS turbocharger (makes about 200 bhp), Wilwood brakes, Tein suspension. Fun, fun...
fun little car. But, obviously, the owner wants quite a bit for it, since all his mods are top-drawer.
I've driven two reaaaaally small hatches over the past few months. Th Suzuki/Maruti Alto and the Chery QQ3.
Both horrible, horrible little cars... but hey... half the car, half the engine, twice the fuel economy of a sedan... guess it'd work if you really wanted it to...

Well, actually, the interior of the QQ was actually quite respectable, and the 1.1 liter engine had some punch (well... at least up to 40 mph... after which it takes forever to get to 60...) but I'd rather pay more for gas than get one of these.
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But as for the main question... how do we improve small cars? Well... the Honda Fit/Jazz, as previously stated, already does so much of what you want a full-sized car to do. It has great headroom and legroom, it handles well, accelerates well and gets great economy. And the sedan version, though pretty ugly, has a godawfully large trunk... 500 liters! Much bigger than the Civic's!. Beauty? It's in the eye of the beholder... and, as you can see with the Fiat 500 and Mini, it's possible to make small cars pretty.
Crash safety? Considering your chances of surviving a crash in a Fit or Yaris are considerably better than in some full-sized pickups, that's not as big an issue as some people choose to believe. It's not overall weight that provides crash safety, but the amount of stiffening put into crash structures. To tell you how stiff these babies are, they have actually put on some weight due to crash strengthening. A Honda Fit tips the scales at one ton... some 400-500 pounds heavier than a comparable small car from ten years ago.
The only things missing from most small cars is bump isolation and insulation... but then, to add more of either will take away from their merits... namely lightness and spriteliness.
Oh... and maybe more power. A 150 hp turbocharged 1 liter engine, IMHO, would be just about perfect...
