I think I'm still confused about the question.
Are you thinking about the induced drag from the blades moving through the air and generating lift along their length?
Both lift and drag will increase with a longer blade. Although, I wonder how the l/d ratio changes along the length of a blade, which may be at the crux of the question. You said
Originally Posted by
AdamFrisch
But at some point the drag increase must 'catch' up with the oversize...
But the drag will only catch up to the lift if the l/d ratio changes for some reason-- perhaps because the tip velocity is so much higher in a large-bladed prop? I don't know that l/d does change, but I think that drag by itself isn't as important to consider as the ratio when thinking about the prop efficiency.