Is this sort of generational loss worse with smaller film?
Yes. Smaller frame means larger relative size of film grain. And each new "generation" (copy) consumes resolution in the form of "grain as detail" that must be preserved. Each generation also adds more contrast, etc.
A simple, straight duplication of a piece of film is one thing. But composite effects often require multiple steps and passes through the optical printer. One of the ways the VFX artists got the highest quality VFX for
2001: A Space Odyssey was by doing "latent" composites. That is where the film is exposed multiple times by rewinding and making another pass.
2001 did have some composite work requiring optical printers or animation stands, along with hand rotoscoped travelling mattes, etc. But the work was extremely conservative—as close to one shot as possible, as though the scenes were real.
Larger film stock, like 70mm (which is actually 65mm before audio) is expensive. VistaVision used cheaper 35mm stock horizontally, rather than vertically, as with most film formats. Thus, it provided a frame similar to that of 70mm for less money. Vista was "obsolete" by the time
Star Wars came out, so the nascent ILM was able to buy up Vista cameras for VFX work cheaply. Special, custom-made Vista cameras were built for the sequel (
The Empire Strikes Back).
Want your mind really blown? IMAX uses 70mm film "Vista-style," which is why those movies are so strikingly sharp and clear.