I think the small cage is the best of both worlds. The large cage has it's faults, just like the ring has it's fault. In the large cage it is too easy to avoid fighting and makes it harder to cut off the cage. It gives movement based fighters a big advantage, simply because it is so large.
Whereas in a ring you can cut people off and trap them, but you can also fall out of it, which is a danger for injuries to both athletes. Which leads to stopping the action and resets as best you can, but It is never exactly the same dynamic on a reset, than from live action. As well as this it removes some of the strategies fighters have developed to make use of the cage, Cain's fights verse JDS would have looked significantly different in a ring and we would never have seen the Showtime Kick in a ring.
With the small cage, you allow for cutting off the cage easier, force the action, still have fighter safety of no one falling out of the fighting arena and still have the cage as a tool for fighters to take advantage of in interesting ways. Hopefully the UFC will get with the program, and why not? It means more seats, you greedy fucks.