Your example is incorrect. Transaction 4 requires only 1 previous output, since D received BTC1 in a single transaction (transaction 3) from B. The fact that transaction 3 used multiple inputs makes no difference, since it consolidated them into a single output. In your actual transaction, you sent BTC6 to 12yEB7J93XtgXVM343fPdzYw38ZLgE5U2t, and now the owner of that address has a single BTC6 output that he can spend without creating an enormous transaction. In this way, as bitcoins change hands, they consolidate themselves into whatever amounts people are spending them in. It is not true that they just keep getting split into smaller and smaller pieces as time goes on.

As for your situation, if you really wanted to, you could send all your bitcoins to yourself in one huge transaction, after which your future transactions will be smaller, but that would incur an even greater fee than if you just spent your bitcoins normally, so there's no point in doing this. You just have to get used to the fact that Bitcoin simply isn't meant for microtransactions, and anyone who insists on using it for that purpose just has to accept the higher fees that this usage requires.