It's as big or small as it needs to be to tell a story (look at how often the Enterprise
is the only ship in the sector
I work from idea that the big capital ships (Ambassador, Galaxy, Nebula, Sovereign) are relatively light in the fleet, with the bulk of it being made up by mid-sized multifuntion ships (which is why the Excelsior-Class is so prevanent) as well as small cruisers and scouts.
Post Dominion War, there would be a large number of combat ships (especially Defiant-Class, since its small and well-armed), which would then be tasked with escort and patrol duties until things quietened down.
I completely agree with you.