to Laura: yea, this is the starter. The group in NW35 will be moving to Ashdown/W1 in fall 2010.
Given that this is such a new thing, it can't be said for sure whether this would be a good idea. I have a friend my year (2010) living in this new community, and have heard about a couple of other people in it, and I'll tell you this -- the founders group living in NW35 seem to come from a variety of locations/cultures around campus, so in a way I think it can help expose you to lots of different opportunities and aspects of MIT despite its small size.
Also, I find that after a couple months/years, people tend to settle in their own niche within their living group, no matter what size the dorm is. Most people end up with 30ish undergrads in their hall, or however many in their suite, or however many on their team, in their fraternity, etc, so it can perhaps be argued that people naturally end up in tiny groups regardless.
As for distance, I wouldn't know. Maybe someone living at Random Hall or off-campus FSILGs or elsewhere can weigh in. They seem to be happy enough though.
