Whilst I really prefer the 3rd edition farming rules, I do think the small city rule is excellent and should remain.
It makes an excellent house rule.
It's generally very easy to create small cities and for that and the fact it brings 4 points without the rule, small cities always seems a really cheap way to score easy points in my humble opinion. Perhaps someone can convince me otherwise?
Of course, the main reason for revoking the rule was consistency. It was—I think—the only instance of an exception in the Carc rules, and so they are much simpler to remember, and teach, without it. Also, revoking the rule actually makes strategy easier: as one of the old FAQ pointed out, a small city would actually score more during farmer scoring than on completion of the city itself. Streamlining the score keeps the two things more separate which is a good thing for beginners and young players.
(I haven't tried it, but I could imagine that trying to explain to a child that her two-tile city scores 2 points while your three-tile city scores 6 could be a little tricky
)
Also, as more and more expansions are added to the mix, there are quite enough rules to remember
Moreover, without the small city rule I'd imagine there would be a littany of small cities. If this is the case, I can see why farmers and big farms then become so dominant in many people's games.
Actually, I don't think that's the case, although it probably depends on how many expansions you're playing. In vanilla Carc it probably does lead to more small cities, simply because there are fewer opportunities for building; but by the time you've got three or four expansions added it, well, if creating a small city is the best you can ever do with a tile, you probably aren't going to win. By the end of the game, when most of the possibilities have been played out, making small cities may be effective; but I'm sure most of us are, by that point, trying to build and connect farms and farmers instead. And earlier on in the game you're trying to build a metropolis or three, and leech onto other people's cities to steal their points. Also, of course, a couple of points here and there might make a difference if your total is 70, but when you're scoring 300+ it doesn't really matter much.
My view would be that it's a nice house rule if you're just playing with the basic game, but after that, forget it.