According to the Nyquist sampling theorem, to avoid aliasing, the sampling frequency must be at least twice the highest frequency in the image.
If the square size becomes smaller than 1 pixel, the frequency content exceeds the sampling capacity, leading to aliasing.
Therefore, aliasing starts when the square size is less than 1 pixel.
Hence, spatial aliasing will be observed when the checkerboard square size is approximately 0.9 pixels.
Final Answer: \(\fbox{(C)}\)