I guess my real question is: What is the smallest size for the SYSTEM tablespace?
Depends on the Orcale version and the scrips you run after creating the database. For Oracle 8i, the minimum is 50M for the system tablespace. Your system tablespace should never reach the maximum, because then your DB may get corrupted. Create it with MAXEXTENTS UNLIMITED and let the MAXSIZE be big enough to accomodate all possible additions to the tablespace.
Read the following if you dig Oracle internals. In Oracle8i the default storage clause is internalized. There is an internal algorithm which sets the initial and next for the default storage on the SYSTEM tablespace to a minimum of 10k or a multiple of Oracle db_block_size, whichever is greater. For example, with an 8k blocksize the initial and next are set to 16k. If the db_block_size=2048, the initial and next are 10k. If the db_block_size=4096, the initial and next are 12k. If db_block_size= 16384, the initial = 32k and next = 16k.
When I create a database in 8i, I do the at once the following:
ALTER TABLESPACE SYSTEM DEFAULT STORAGE
(INITIAL 64K NEXT 64K MINEXTENTS 1 MAXEXTENTS UNLIMITED PCTINCREASE 50);