That they didn't scale beyond AFHQ (high-quality animal faces: cats, dogs and big cats) at 256×256 is probably not due to an explicit preference for small models at the expense of output resolution, but because this is basic research to test the viability of the approach. If this ever makes it into a product, it'll be a much bigger model trained on more data.
EDIT: I missed the second paper https://arxiv.org/abs/2506.06276 where they scale up to 1024×1024 with a 3.8-billion-parameter model. It seems to do about as well as diffusion models of similar size.
If they approach things this way, and transistor progress continues linearly (relative to the last few years) maybe they can make their first devices that can meet these goals in… 2-3 years?