Some really old cards only like square texture (voodoo 1 & 2 era) but I don’t think thats much of a concern nowadays.
I suppose you might have problems with texture coord accuracy if you had really long, thin textures, but I doubt that’ll ever realistically happen.
I always thought that the cost associated with a texture bind is due to it possibly needing to be shuttled across the AGP, and possibly a whole bunch of cache misses when starting rendering. But if you’ve got many smaller textures then the actual upload is going to be smaller, and you’ll get the cache misses either way.
Assuming you can sort by texture, then I don’t know how much of a difference you’d actually see, it might be interesting to try and benchmark the two. Whether combining texture makes state sorting easier or harder might be worth thinking about though.