Q: Why do we only say the blessing of Al Netilat Yadayim on handwashing when we eat an egg's volume (kabetza) of bread, but not when we eat an olive's volume (kezayit)?
A: The basis for the washing of hands before eating bread is the practices of ritual purity that were observed in Temple times. Part of the routine of the Kohanim (priests) was that they washed their hands before consuming Terumah (holy food) in order to prevent the food from becoming impure. In order to perpetuate this concept, the rabbis instituted hand washing for all Jews whenever they eat bread. Now, according to the laws of purity that were observed in Temple times, only a piece of food that has the volume of an egg (or more) is capable of contracting ritual defilement. Since our practice of handwashing is derived from the laws of ritual purity, then, it would seem that it should also only apply to bread that is at least a kabetza in size.
At the same time, though, handwashing is part of our routine at every meal. Other aspects of our meals, such as, for example, the recitation of Birkat Hamazon (Grace After Meals) are totally unrelated to ritual purity. Eating as little as an olive's volume of bread is sufficient to obligate you in Birkat Hamazon.
In the mitsvah of handwashing, then, we have the convergence of two systems - the laws of purity and the laws of blessings - each of which has its own quantitative standards. On one hand, the rabbis made washing hands a part of the average person's eating routine and, in that framework, an olive's volume of bread is significant. On the other hand, the practice of washing is rooted in the laws of purity and, in that context, only an egg's volume of bread would 'count'.
More simply, we might ask the question: Is the law of handwashing meant to be related to the purity of the bread, as it was in its original context? Or did the rabbis, when incorporating handwashing into the daily routine of the Jewish people, adapt its standards to that new context and disregard the legal status of the bread?
Since we are unsure of the exact formulation that the rabbis had in mind, we only recite the blessing on handwashing when we are sure that it is obligatory, i.e., when we are eating at least an egg's volume of bread (approximately 54 grams).
If we plan to eat only an olive's worth of bread (approximately 28 grams), we wash our hands without a blessing. Some authorities recommend washing even for less than an olive's volume, but this is not required. For more details, see Shulchan Aruch Orah Hayim 158, as well as the commentary of Mishna Berurah.