Windows 7 Home Premium or better on a Netbook?

"I wonder if there is a technical
reason for using Windows 7 Starter?

There are no technical reasons to use Windows 7 Starter (au contraire), the reason is purely economical (it's cheaper - you buy cheap, you get cheap): while the resource usage is pretty much the same, Windows 7 Home Premium outperforms Windows Starter on the same system in most aspects, Starter even boots slower than Home Premium (see benchmark resuslts below).

The test platform is a Lenovo IdeaPad S12.

(courtesy of German compumag Chip.de, although it's in German, the results aren't not too hard to interpret)

Windows 7 Home Premium or better on a
Netbook?

Most certainly! Not only is it faster with Home Premium, you also get all the bells 'n' whistles. :)

AFAIK, you can't officially buy Windows 7 Starter anyway, there is no retail version. it's only a cheap option for OEMs to sell netbooks with Windows 7."

"The main reason when they come with starter edition is simply because it costs less.... Nothing technical.

Windows 7 does work on a Netbook, but do not expect anything fast - Windows XP in my books is still better as the Atom CPU is slow.

Edit - Sorry, didn't fully answer your question...

Starter is simply the same functional code base as ultimate or any other edition with many features disabled. You would be able to install ultimate then disable all the additional features not present in starter (such as Aero) and it should perform about the same.

I know no alternative to the Offline Files feature, other than manually creating copies / using synchronising tools such as Microsoft Sync Toy or to a less extent - Mesh or DropBox. Lastly, as Grant Palin said, and I can recommend - Truecrypt makes a good alternative to Bitlocker."