The Catalina 27 is one of the boats in the book and I'm partial to it. There are scads of them for sale and they're cheap, they have standing head room (for some) and they sail well. They also are set up for an outboard, so you can get a cheap used one now and a nicer one later.
Having done something similar to what you're suggesting (when I quit college I did it to move aboard a 31 footer), what I did was FIRST find the marinas that would allow live aboards (as has been suggested). For me, I found that the 30ft slips had a 3month wait list and the 40foot slips had a 1.5year wait list. That (and lack of funds) sealed it for me, a 31 footer it would be! (they allowed a little bit of overhang in those days. CHECK about overhang now though. A catalina 30 for example is 33+ foot long as measured by some marinas and many won't let you put one in a 30ft slip)
What size is the smallest you can live on? Well, that all depends on you. Personally I'm happier in a tent than a 4000sqft house, so I can go pretty small. Others can't. As a very general rule I'd say that 27 is about the limit for most live-abords and many can't take 27. Also 30ft slips are available the world over in quantity and the Catalina 27 can always fit in a 30ft slip. Living aboard on a 30 footer is VERY common, there are lots of boats in that size that many can live on.
Boat length is an odd thing. Usable space seems to increase by 50% from 25 to 27ft. It seems to double from 27 to 30. After that, usable space doubles every 5 foot of length. Costs double too.
Living aboard is great and spending all that time aboard and at the dock lands you opportunities to learn, to get passage on other boats, to join race crews etc.