A big problem with the theory that the Romulan Star Empire is small (confined to a system or two) is what happened in "The Way to Eden." The space hippies divert the Enterprise into Romulan space and they seem to travel a ways in there and stay a bit yet there is never any sign of a Romulan ship or patrol or any sort of reaction to some sort of early warning system. You could almost believe that the RSE was small with all prior contacts that we saw in the show because every time they went into the neutral zone they almost immediately made contact with the Romulans. The lack of contact of ANY Romulans in "The Way to Eden" seems to indicate a much larger area than just a few systems.
I don't see how that would be a problem. Even with warp drive, space is very big; if the Romulans had detected the Enterprise penetrating the zone it still would have taken them a couple of minutes to get a patrol ship to investigate, and Enterprise wasn't in Romulan space for nearly long enough for them to make the interception. The other "quickly intercepted" encounters were probably more dumb luck than the Romulans' being incredibly savvy at border control (similar thing happens in TAS, where the Romulans take quite a bit of time to intercept the Enterprise despite the fact that they knew ahead of time that their spy was getting ready to lure them in there).
Speaking of TAS, there's one other point to remember: Carter Winston, disguised as Kirk, orders Enterprise to lay in a direct course for Ratar-III, through
the neutral zone. This would seem to imply that Carter had picked a location on the other side of it and that in order to follow his orders Sulu would have to plot a course that takes the Enterprise directly through the zone and then out the other side.
Plus, later episodes in the spinoffs (including the immediate TAS) reinforce this impression; there's even a star system inside the actual Zone, between UFP and Romulan spaces, in "All Good Things.." - the Devron system, out of limits to both Picard and Tomalak until they mutually agree to ignore the peace treaty.
By TNG, though, we'd be seeing the Romulans after over half a century of modernization and expansion having come out from the Klingon Empire's brutal umbrella. By that time they would have claimed dozens or hundreds of star systems and the new neutral zone would be redrawn along a mutual compromise between Romulus and the Federation for a list of worlds that neither side will try to annex. In the 24th century, particularly, the neutral zone doesn't seem to actually enclose all of Romulan space the way it does in the 23rd and it's entirely possible to reach Federation space by simply flying around
it (which they seem to do in "Face of the Enemy").
The new neutral zone also seems to have a larger number of outposts than the old, and Romulan space is now large enough that it shares a border with Klingon and Cardassian space at two different points. Even if you don't buy the interpretation that the 23rd century empire was confined to a single (maybe multiple star?) system, it's just as apparent that the Empire was quite a bit larger and ALOT more powerful by Picard's time.