There is latency in block propagation in a truly decentralized network on the public internet. The latency will grow larger with bigger blocks. Blocks are in competition to be added to the blockchain based on the cumulative difficulty. A staking node can produce a block with a higher difficulty before a block from another node is propagated towards it and will orphan the competing block. This is less of a problem when blocks are smaller. In the private 10 Gb/s intranet the latency between the staking nodes is negligible, transaction throughout can be very high.

What you do with the blockchain size is not related to the above, is another big scalability problem.