Actually, you are quite right. There is no reason to stop at 1.6x, you could well go even smaller, hence the beginnings of the 4/3" system pioneered by Olympus and Kodak (and Olympus has long since been using relatively small sensors in its E series DSLRs).
It remains to be seen at which point the disadvantages will outweigh the benefits, but definitely full frame is not the ideal standard.
It remains to be seen at which point the disadvantages will outweigh the benefits, but definitely full frame is not the ideal standard.