Hi BMOG,
Hm...you probably need to specify if you're referring to tracking or mixing when you say "recording in a small room". Tracking of instruments in small, treated rooms is done frequently and with good results. Even large multi-room studios track individual instruments (voice, guitar, bass) in small heavily treated rooms...they're just called iso booths (Whisper Rooms are super common in VO). In fact, in my experience, use of iso booths for amps and singers for bands that want to track multiple instruments simultaneously is extremely common. Dropping an amp or a singer in a booth happens all the time.
If you are tracking in a small room you ABSOLUTELY want reflection control...usually lots of it.
For mixing it's a bit different. Larger rooms are nice, and the rule is construction first, treatement second and EQ third. That is, first construct the room appropriately (dimension ratios matter here, as does square footage and wall placement), next treat, and finally EQ. Keep in mind that treatment is a poor substitute for construction, and EQ is a poor substitute for treatment, but they all support one another and there is always overlap. Bottom line: particularly for mixing, anyone that thinks that an 8x10x8 rectangular room with no treatment and ARC2 running on the 2-bus is just as good as a real mixing space is kidding themselves. You may be able to get reasonable mixes with some practice in that room, but a real mixing space will be WAY easier and almost certainly improve your results.
Good luck,
Dean