Direct drive vs. gear drive, and which one is "better" is going to come down to how an individual rider plans on using the bike. There is no one easy answer "fits all/universal" drive that's going to suit everyone. Gear drive may work out better in the hills and stop and go traffic, and while the direct drive works fine in that environment, it really starts coming onto it's own at higher speeds, say in excess of 15mph. This makes the direct drive (DD) appealing for people that commute to work for instance.
Re: direct drive motor diameter, all else being equal, the bigger the motor the more torque it has. Simple matter of leverage. A larger diameter motor has more leverage on the load/wheel than a smaller one would.
Direct drive is less expensive to manf, is able to shed built up heat faster, and is more efficient at higher speeds.
Gear drive, all else being equal, is peppier in stop and go situations, and stronger wile climbing small hills. I find I can keep mine at a lower PAS level more often than I could with the direct drive. On paper, there is potential for more noise do to the gears, but not noticeable in my experience. I can barely hear either one.
If given the choice between one or the other, again all else being equal and based on my usage (I have no use for speeds over 20 mph, I'm a big guy (300+), and I spend half of my time in a coastal area where a direct drive, even a big one (1500w) struggles with some hills I frequent), my vote would be for the gear drive. I've gone with a good one, the MAC 12t, that's designed to do what I need done, and I'm loving it.