Does anyone use the small circular needles to knit infant hats and do they work OK?
There’s no reason they wouldn’t as long as you’re using an appropriate yarn weight. You can use any needle size and weight of yarn although lighter weight is often better for infants.
I’m in a group which knits hats for an orphanage, so I bought a 12 inch needle to do infant hats. It isn’t as comfortable to use as the longer needles, but does get the job done. Probably as I use it more I will get more comfortable using it.
Those small needles can be uncomfortable. You might want to try another kind of needle or technique like double pointed needles or magic loop. Take a look at the Free Videos, Advanced Techniques, Small Diameter Circular Knitting at the top of the page, just to see some other options.