Hey Newgirl:
At 5'5" tall, you should have no problem riding 26" wheels. You'll find that as Cory and Wayne have said, they will roll over terrain better and there is a FAR better selection of tires and rims available suitable for mountain biking.
In the Mountain biking world, 24" wheels were hot for a year or two in the late 1990s and into about 2000 and then that trend ended (at least for two 24" wheels - some people still ride a 24" rear wheel or have frames that were designed around a 24" rear wheel). I even had a 24" x 3.0" front wheel and a 24" x 2.6" rear wheel for a season (which looked quite silly because I'm 6'2" tall!). However, pretty much everyone has got back to 26" wheels.
24" wheels can certainly be an advantage for a really small rider. The reason for this is because it is very difficult to get the front end (i.e. handle bars) any lower than a certain height - especially with longer travel frames: the fork is always a fixed length and the shortest head tubes are typically around 4-4.5" long. So, even if you can shrink the rest of the bike down in size, you still end up with a front end that can be too tall for some small riders. A 24" front wheel can help drop that height down a bit. However, at 5'5" I would say that you should be able fit most 16" or "small" frames reasonably well. Once a riders height drops below 5'3" / 5'4" or shorter, it becomes MUCH more difficult to design a longer travel frame that can meet all of their needs.
My wife is 5'2" tall and here current 5" travel bike works great for her with dual 24" wheels. However, we're getting her a new 6"+ frame in the next few weeks and even with the higher BB height, I'm pretty sure we'll get her on 26" wheels.
Most frames are designed for 26" wheels: this means that they're going to handle better with 26" wheels. Having a low BB height is great for corning, but at a point it becomes too low and actually becomes a hindrence to pedal and impeeds your corning ability.
My suggestion would be to ensure that you have a frame with reasonably decent stand over height. Next, ensure that you have a frame without an interupted seat tube - or at least a frame that allows you to fully lower the seat so that the seat tube cradle is about 16" above the BB height. THIS is by far the most important stand over issue - can you get your seat down low enoug so you don't get caught by it and it is low enough that you can maneuver around the bike?
Cheers!
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