I used to run a good $.50/$1.00 game in Manhattan on a Paulson set with 160 $1s, 160 $5s. We'd often get a nice chunk of greens in play.
Now, my regular game has a 25-cent big blind, and my irregular game has a 50-cent blind, and I'm playing them on a set with 200 $1s and 200 $5s. I've never been pushed past the red.
But I've just ordered a set of Boardwalks with oversize $20 chips (loving the yellow) for my micro game, and I'm contriving how to run the buy-ins so that I can force the occasional $20 into play! But I want to do it without hurting the game. (I fear certain people will turtle up whenever they win a big chip, or will resist breaking it.)
I had eleven players (ten chairs and a stool) on Friday in my micro game, and I only got about 100 red in play. (It didn't help that I was doing well. I'm one of the people who rebuy very reliably when doing poorly.) The reds get played hard, but it wouldn't take much in the way of 20s to take a lot of chips off the table and tighten things up.
To me, all of this argues for a $20 instead of a $25; the $25 would be even more likely to screw with people in such a low-stakes game. In a $1/$2 game, however, I don't think the difference in chip counts between the $20 and the $25 would affect the play, so I'd feel free to use whichever denom or color I like.