No, maps are not smaller in general. In the previous version(s) there were 3 size available: default, small and tiny. The default map size was the largest one - default. In the current version exactly the same 3 sizes are available, but they are called differently (and more clearly): large, medium and small. Apart from the names, the default size has been changed: it is now medium (former small) instead of large (former default). So the generator does produce smaller maps, but only if it's not told otherwise. Why? Because I think that medium-sized maps a) look better and b) are more useful on average.
While large size of map (and high density) usually means a larger size of a village, a town-like scale is not guaranteed. Cases like your example happened before, it is not something introduced in the latest update. Maps like this one are more common: https://watabou.github.io/village-generator/?seed=906625696&tags=large.