I've thought about apple care but the price plus deductible and the fact that I live 60 miles from an Apple Store just doesn't seem worth it. I'll probably safely tuck it away the first couple weeks then start risking it.
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My wrist is the same size as yours and I ordered 42mm. I'm happy to see that it doesn't look big on your wrist!
My wrist is about 160-165 mm and I got the 42. I thought the 38 looked skimpy on me... but I like big watches in general. I think a lot of us would say that a 40 mm watch would be perfect! But I have my 42 and am very pleased with it.