29ers are better for rolling over bumps and rocks, not on a level and smooth road. In general, that's where MTB's are ridden and raced (my son was a Cat 2 road racer and an Expert MTB racer, as well as a collegiate racer road and MTB). The larger tires is an extension of a skateboard going over a 4" curb kind of concept.
For a while, time trial bikes actually used 650 mm tires instead of 700 mm more for aero reasons, but the larger wheels made more sense for stability and frame geometry. And I will note that the carbon disk rear wheels and tri-spoke carbon front wheels favored for time trial bicycles ARE heavier than spoked designs with deep V rims--the aero advantage makes for a net speed gain on a flattish course--and TT bikes don't have to repeatedly slow down and accelerate. But when there is a lot of climbing involved, most TT riders will choose lighter and less aero wheels. It's always a tradeoff, bikes and cars both.
Note that now, 29" mountain bikes are being challenged by 650B, which are about 27.5" outer diameter. Kind of an "in between" and bike frame geometry especially in smaller sizes can be made more logical--the 29ers end up with weird geometry for small riders. 29ers are 700C wheels, so using that size was logical because it was the same as a road bike rim size. The 650's accelerate faster because they are lighter.
I'm with you on the brake thing--I did not mean to imply that every brake can fit in a 17" wheel, just that there are compromises as wheel diameters get unnecessarily larger. Again, a gigantic F150 pickup with 20" wheels is limited to a payload under 1000 lbs because of wheel capacity (leverage on a larger wheel is greater). So 4 big guys in the truck and they can't even bring a cooler of beer... And I find it funny to see a little 9" drum brake on the back of a small car thru the spokes of an 18" wheel...
I would say that many big wheels are still for show--so many cars have a base size wheel which fits around the brakes and optionally upsize the wheels by 1-3" for people who want to "wear" their wheels. Bigger wheels are often wider as well, and it makes me cringe to see big dollar wheels that have been curbed, or someone on the side of the freeway with a tire like a large rubber band that caught a chuckhole and trashed a huge chrome POS Chinese wheel... Rotating weight means a lot for accel/decel. So for a tire with a fixed width and outer diameter, let's assume that the tire belts will be the same on a 17" and a 20" tire. But then consider where the mass of the rim will be--the 20" rim is not only heavier, but it is closer to the outermost point of the wheel/tire combo.
Good discussion,
George