Nathanael said (John 1:46a):
“Nazareth! Can anything good come from there?” Nathanael asked.
What was the reputation of Nazareth at the time? Was it considered a "joke town" to be made fun of?
No solid source, but I always assumed Jerusalem Jews at the time thought of Galilee (and therefore Nazareth) Jews as hicks. It would be like suggesting the Savior would come from West Virginia or New Hampshire. The passage implies that Nathanael himself was from Galilee (perhaps Bethsaida). In that case, it would appear he considered Nazareth even more of a backwater, like Texarkana. (Some of my wife's relations are from that town and I get the feeling they make their unimportance a point of pride.)
As Affable Geek points out, there is no prior or contemporary (including Josephus) historical record of the town. One must assume that Jesus' hometown was very small.
I did find some of Josephus' description of Galilee:
It should be noted that Josephus was part of a Jewish revolt in Galilee that was put down by Vespasian. He had some reason to emphasize the importance of Galilee. However, we might glean some of Nathanael's surprise that anyone would claim the Messiah came from a village in that region since it was populated by foreigners (i.e. gentiles) and known more for its farming and fighting than its learning and virtue.
According to the Anchor Yale Dictionary, there is no extra-biblical mention of Nazereth, prior to 300 AD. As such, the conjecture is that Nazereth was just a minor village in the proximity of Sepphoris, the town Josephus called "the crown jewel of the Galilee."
The much larger town of Sepphoris was only a few kilometers away, and is more likely to have been where Joseph and Jesus would have worked.