Yeah I do agree with you about knowing exactly where everyone is in the circuit keeping it neat and tidy, but if say 3 or 4 aircraft are in the circuit all doing touch and go's in a small circuit then it's quite hard for anyone else to either take off and leave the zone or arrive back from a nav as there is little room between aircraft in the circuit. This is obviously when you dont have ATC just A/G (all movements at pilots discretion).
Sure you could limit the circuit to no more than 2 aircraft doing touch and go's to allow room for others, but that isn't really possible at busy training fields.
A bigger circuit with the same number of aircraft doing touch and go's means that other aircraft can slot in between and take off and leave the zone without having to wait for too long at the hold and hence not wasting their money (if you are paying brakes on - brakes off time).
Just my thoughts!!
Foz