A quote from SimGuruMax ages ago addressed that question about lot sizes.
His reply was " We could certainly afford to simulate many houses that could be built on a 100x100 lot, but what about the worst-case scenario? In development, we have to do crazy things like build a house that fills the entire lot with three stories of rooms packed wall-to-wall with chairs at tables. Then we tell a Sim to eat food and it takes them 5 real-time-minutes to decide which chair to sit in. To some degree, from a purely simulation standpoint (there are other limitations like rendering), we have to be able to handle these worst-case-scenarios on our lots or we can't claim to actually support that lot size."
Since this was stated so long ago, it might be outdated, but that was what was said about it previously.