I am not picking on you and agree in concept with most of what you say.
But I have to disagree with the pocket knife being the best all round knife. Yes for a squirrle, a buck 110 folding hunter (just off the top of my head, not exclusively recommending that) is a great choice.
And you are right a 8" breaking knife would be asinine to process a squirle with.
But I think someone mentioned a bird and trout knife above, that would work great for a squirrle.
A fixed blade may not be the "end all" in knives, but its hard to beat I mean you could do a squirrle with a shorty ka-bar just fine. I've used a huge heavy cleaver to totally break a chicken down from a whole bird to boneless and skinless parts. Its not the knife I would use to process a 60lb box of chickens, its too heavy, too wide and clumsy, its too much knife for the job. I can do it though and have. In front of an audience. (Group or customers watching)
Honestly, for everything from squirrle to deer or similar sized game, a 5 or 6 in narrow, flexible angled boning knife is about perfect. Victorinox makes a good one for a price you would be hard pressed to find a folding knife that would do the job as well at the same quality. I'm not saying you can't do these things with a folder, but I am saying that its not as good. The boning knife would out perform just about any folder on a squirrle hands down. Its narrow, sharp and flexible. If you just do a squirrle or three every now and then, a folder is fine but if you do em all the time, this a a better option. And it scales up much better than a folder to larger game or harder to process game. The OP mentioned wanting to do deer and such at sometime so I think my and some of the other responses were geared toward that use as well. Again, not saying that a folder is a bad choice at all, especially for squirrle, its just not the best knife around. Again not picking on you, just offering a different opinion. I love folders, love love love folders. But if I could get away legally and socially carring a fixed blade of the same size, I might not ever have a folder on me again. Wait strike that, folders are just too cool to not have. Heck, I'd probably carry both!