True, you would increase pressure (P=F/A - smaller area means more pressure), but the smaller diameter would move a smaller volume of fluid, so it could never properly fill the large cylinders in the calipers, particularly as the pads and rotors wore, and the pistons had to travel farther.
You might check into the ZR1 master cylinder, since it's supposed to have a similar bore to ours. I've never paid attention to the master cylinder, the few times I've had an opportunity to look under the hood of a ZR1, so I can't tell you what it looks like.
I think the only advantage would be visual - there really isn't much technology in the master cylinder, itself. Most of the braking advances are in the calipers and booster, and active control systems like ABS. Master cylinders are fairly similar, technologically.
If you're thinking about braking upgrades, though, I know some people have adapted modern (C4 or C5 - I can't remember which) calipers and rotors to fit on our cars. Going that way, you would possibly be able to use the modern master cylinder, or continue to use your existing master cylinder, for a 44% increase in braking, rather than a 30% decrease. You'd have to watch out, though - your pedal would have less travel before lock, so you'd have to be more sensitive with your brake use in order to keep from accidentally applying them more aggressively than you wanted.
Joe