I'm only worried about the small group issue; would, say, 2-3 PCs be enough if I use my own tailored encounters?
Yes, I think so. I had great fun running a 2-PC online game a while back. That used 2 5th level PCs (Fighter & Warlock) in a pretty much '1st level' dungeon, ie most of the foes were 1st-5th level. The highlight for me was the battle between the PCs and 12 goblins - 1st level Goblin Blackblades; the PCs tore apart both these 'elite' goblins and (via the Warlock's powers) much of the dungeon they were in too!
I don't see any reason why it shouldn't work with 1st level PCs, and there's little chance of the 'grind' problem that can afflict large groups. You do want to err on the side of caution when encounter building - eg for 2 1st level PCs I would treat the standard 200 XP of an EL 1 encounter as a mid-point, not a 'floor'. Many encounters could be lower (50-199), and few much higher, I wouldn't go above about 250 XP at least to start with, and don't have more than 1 monster of level 3+ - 2 3rd level Orc Raiders (150x2=300) could easily kill 2 1st level PCs, whereas 3 1st level Goblin Blackblades (100x3=300) probably would not.