They’ve been found!!
http://www.nytimes.com/2004/10/28/science/28tiny.html (free registration required)
(Edit: another URL http://abcnews.go.com/Technology/story?id=198867&page=1 )
Once upon a time, but not so long ago, on a tropical island midway between Asia and Australia, there lived a race of little people, whose adults stood just three and a half feet high. Despite their stature, they were mighty hunters. They made stone tools with which they speared giant rats, clubbed sleeping dragons and hunted the packs of pygmy elephants that roamed their lost world.
…
The little Floresians lived on the island until at least 13,000 years ago, and possibly to historic times. But they were not a pygmy form of modern humans. They were a downsized version of Homo erectus, the eastern cousin of the Neanderthals of Europe, who disappeared 33,000 years ago. Their discovery means that archaic humans, who left Africa 1.5 million years earlier than modern people, survived far longer into recent times than was previously supposed.
Homo Floresiensis my foot! Homo Bagginses would have been a much better name.
Caj