Damage dealt to small units

[ComradeP]

That may be so in any area with some cover to hide in, but otherwise each target in the small unit is more likely to be fired at than if it were part of a large target I'd say.

10 men firing at 10 men would mean each man would usually attract a limited amount of fire, as each opponent also needs to keep an eye out for the rest of the enemy's men. 10 men firing at 5 men is already much worse for those 5 men. Similarly an assault against a single house is more likely to end badly for the defenders than an assault against 3-4 buildings.

Target density has an effect on artillery fire, but not necessarily on an attack with a target like an assault or direct fire.