Size doesn't matter! :)
EVERYTHING gear-wise looks good on a Lala, even the one-piece heavy armour (ie. the tin can look) makes Lalas look cute.
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Lalafels are great but my only issue is even with the biggest lalafel sometimes its impossible to see where your character is. Like when you have to stack behind Titan in EX or other battles. The only way to avoid this is to turn of other people's battle animations but I don't like doing that. to me thats the only Downside otherwise Lalas Rule!
What you should think of when planing for a Lalafell Paladin as well: Weakest base-constitution, aka lowest baselife of all races (-5 Constitution in comparison to a roegadyn). While I think that does tiny bit HP doesn't matter, I have seen several free companies who forbids Lalafell Tanks. My Tankmate (roegadyn) at my company once argued too that during their Coil-beginnings bosses attacked so hard that after an attack he survived with 10-50 HP left. This would have been a wipe if he would have been a Lalafell. So you can encounter situations where you'll die because of your race.
So it is up to you if you do Lalafell Paladin, you'll have a tiny little bit lower HP than other races and you may have to deal with some sceptical "Pro's" who are not gonna let you tank or blame you afterwards for a tankdead-wipe.
They look good on any gear !
best choice you will ever make
I tried playing a lala, but I just couldn't stand the camera angles (especially on things like talking to a quest NPC of one of the tall races.) But that was the only drawback I found, otherwise they're awesome. Though as a Roe sometimes I have trouble noticing them when they stand close to me.