A software interaction would explain why the perception of low signal and the reality of few actual dropped calls is so different. And most of these cell phones today use no where near the power in watts that the older generations used, so it is mostly software on a very very low signal. Which is why none of the phone have the old radio style antennas any more.
Very interesting. I don't know enough about current cell phone technology to comment from a technical point of view, but in general engineering terms, I'll have to agree that your statement would make sense in terms of everything getting smaller and lower-power.
Using software to make the most of a weak signal... I don't doubt that's part of the puzzle.
OTOH, the hand around the phone causing the signal to drop even further -- that's still a fundamentally hardware issue. We'll see if better software can accommodate it.