Pardon, Niefel Giants are indeed size 5 currently, I meant to say Niefel Jarls didn't necessarily need to be size 6.
And I think you downplay the effect a bit. Yes, it would make their line troops a bit better if they dropped to size 3, which of course would be nicely balanced by a slight reduction in stats. However, one of the cornerstones of the power of the giant nations, is the incredible benefits that they get from Nature blesses. Any reduction in base HP will be reflected by a commensurate reduction in regen rates, and that is a very big deal, even in the case of the aforementioned Skratti thugs. As an aside, I don't think too many people would argue if Niefel Jarl Chill auras were reduced a bit, each one is about 3x as potent as the aura from an Ice Devil (the Lords and Generals of Kokytos!), who could probably use a slight increase as well. Perhaps Ice Devils AND Niefel Jarls could both compromise at Chill (10).