My experience is that after a point it gets annoying, and then oppressive. The proximity in smaller communities can help when everything is right. Neighbours can check on you, bring your kids to school, this sort of things. But at some point personal issues arise, and then it’s impossible to get out of them. That’s how you end up with family feuds over centuries because at some point someone did not like someone else.
Also, it’s nice if you correspond to what the community expects. If you don’t and you don’t build your own niche very quickly you get typecast and then outcast. Humans can be vile and petty, even in small communities. It gets particularly hairy if your bully is somewhat popular locally. Ask me how I know.
Anyway, I much prefer larger communities. I can still make friends if I want to, and if we have a fight it’s not the end of the village.
This is a take it or leave it issue that will come down to personal preference.
The small town mentality knows that this is a possibility, and give it due deference. This is why everyone smiles and nods at almost everyone, almost always. Never cut anyone off. Accept gifts graciously. Mow the elderly neighbors' lawn, put the neighbors' trash out and bring it in if they forget. Do not mention sports, politics, religion, or intimacy unless you are in familiar company, and certainly not if said familiar company holds opposing views.
It does make for a bit of stagnation in that new social trends will always be more slowly adopted, if at all, due to the desire not to offend.
Imagine driving for years on end without anyone ever cutting you off, and people letting you cut if you look to be in a hurry. People offering comfort when you look down. Relative strangers cooking for you when you're sick. All done because they know you to be the kind of person who'd do the same if the situation were flipped because you've shown yourself to be that kind of person.
It's great if you like it, but if it's not for you, it's definitely not for you.