Yes, I can certainly get by with much less during an emergency situation. However, I'm finding that a big factor is the installation cost as both require transfer switch, wiring, propane tank, underground conduit, permits, etc.
Also... the bigger units supposedly put out less noise (water cooled vs not) and run more efficiently. So, it almost makes sense if I'm doing this that I go the full route.
“Also... the bigger units supposedly put out less noise (water cooled vs not) and run more efficiently”
Probably true; but a serious piece of sound-deadening enclosure might be the better investment.
All in all it is a complex series of interconnected considerations, not trivial at all.