According to the PS3 site, it is 199 mb.
I had thought it was over a GB as well, mainly because every thing I've downloaded the past month has been huge (Vanquish demo, SA1, Comic Jumper)
Actually Iizuka said it was part of the main series. Don't have the source with me right now but i'm sure those who have been watching/reading his interviews would know what i'm talking about.
Yup, it was in one of the many interviews out there (too lazy to search now, but I read it too). It caused quite a commotion at TSS, causing many a Wii fan to thumb their noses at PS360 owners.
Sonic canon is so f'd up that it's best to just ignore it, but since the subject was brought up...
Colors itself is a part of the main Sonic series, in that the series goes: Sonic 1, CD, 2, 3&K, 4, SA, SA2, SH, '06, SU, SC. Shadow the Hedgehog and Chaotix are, in my opinion, side stories that exist within the main series.
edit: Add 3D Blast in with the spin-offs as well, as detailed in my next post.
Unleashed and Colors aren't so much a reboot as they are a simplification of the series. All the stuff that occurred in SA1 through to '06 DID occur before Unleashed, but Sonic Team chose to not have the characters refer to those past events in every cut scene. Just because we don't see Knuckles, Shadow, etc. doesn't meant they don't exist.
Stuff such as the Game Gear and Advance series are debatable, but best left to their own little portable storyline. Spinball, Mean Bean, Riders, etc. are all more like the spin-offs Sanus is talking about. Existing in their own little universes apart from the main series. I doubt even Sonic Team acknowledges them in the regular games... at least until the Babylon Rogues pop up in Sonic Anniversary
Stupid Sonic series continuity.