A lot depends on timing. The small cylinder but many cylindered engine has several advantages over a large cylinder engine.
1. The small cylinders offer better cooling. Both due to a higher cylinder wall to volume ratio and and a shorter path for the heat to travel from center of piston to cylinder walls. This allows for higher compression or higher boost than the big cylinder engine can use.
2. The smaller reciprocating parts allow for higher rpm. The DB 604 could turn about 18% more rpm than the DB 603.
3. The smaller cylinders should show higher volumetric efficiency than large ones.
For any given grade/PN number fuel the high rpm small cylinder/multi cylinder (over 12 in the case of inline or V engine) should show a marked advantage over the large cylinder 12.
However there are also a number of disadvantages to the layout/s and the large 12s did NOT stay frozen in time.
Comparing a 1943/44 large 12 to a 1940/41 24 cylinder engine ignores some of the progress made in rings, bearings, piston design and other aspects that helped close the gap. Scaling up only works to a certain extent. Changing the stroke from 160mm to 180mm and keeping the smaller engines rpm means about a 26% increase in loads on the rod bearings and main bearings just from the change in piston speed and doesn't take into account the increased weight of the bigger rods and pistons. Granted the scaled up engine has larger bearings but are they large enough?
In the late 30s many engine designers/companies thought they could just add cylinders or adopt complex engine layouts with little more trouble than they had with the lower number of cylinders. Time proved them wrong. But without the aid of the retrospectroscope it is a lot harder to find fault with them. If all you have is 87 octane fuel you run into limits on how much power you can get from a certain size cylinder pretty quick. The size of the cylinder helps dictate engine rpm. The common V layout was 12 cylinders so the basic limits were pretty well known.
The ways out included better fuel for higher boost/compression. Higher RPM which required better bearings and a much better understanding of harmonic vibration. Or going the 16-14 cylinder route.
I don't really accept all of those arguments as having a significant effect. I think the main issue with big spark ignition cylinders was the propagation velocity of the flame front "deflagration" i.e. sustaining a stable burn that completes in time. One thing that you've listed as an advantage is better cooling is also a disadvantage, you don't want to be loosing heat from an engine, you want to retain it but cool the engine parts.
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