I really like your discussion, and your question.
My answer is honest. I've said for years that the city was no "better" with 35,000 or 50,000 people than it was with 24,000 or whatever in 2004 which was my first burn, and even then people were saying it was "better last year."
The Temple in 2004 was better than the Temple in 2005, 2008 or 2010. People don't stand around in amazement at how SMALL the man looks or how quiet the fireworks are. In 2008, during the dust storm, nobody rejoiced that the fire dancers couldn't perform around the man. I missed the years of the oil derrick explosion and the Trojan Horse, but, people still talk about them.
Miracle Grow, Do-Lab's flower, is my single favorite art piece, ever. I drove a hand-built mutant vehicle named Aemma around the 9 o'clock plaza in 2010, but, nobody here remembers it. People remember Miracle Grow as they remember La Contessa.
Read through the forum and you'll not find many posts about how great the art wasn't.
Taken at its logical conclusion, the idea that smaller is better ends with one or two people on the Black Rock Desert shooting guns, playing some music on a portable stereo, running around naked, having sex and lighting off fireworks. Which is awesome. But it's not Burning Man.
Burning Man Winner, 2012
"The Red Baron is smart.. He never spends the whole night dancing and drinking root beer.. "-Snoopy, WWI Flying Ace