I generally have it set to 300 and that's the "primarily intended/target battle size". Things will be a bit different with it set low or high, yeah, but I don't think to the extent of, say, making frigates useless. With 200 DP (40% of 500; assuming an endgame fight where you're going to start out down in DP almost no matter what), you can still only deploy, what, 3-4 capitals. And if you have 300 DP, that's... still enough for *some* variety - or, rather, enough that you can't fit only caps in there. And going all caps does give up on a potential slew of fleetwide bonuses.
I do wonder if max battlesize should be turned down to 400 by default, though - I think that range makes more sense with all the other changes. Since with objectives, the maximum total is 120% of the max - 60% for each side.