I think you answered your own question. IMHO it relates to scale appearance, both the engine, itself, and also how it looks on the track (over-hang, etc.). It seems to me that the minimum diameter an engine can run on is primarily, but not exclusively, related to the spacing of the trucks/wheelsets. So, you can't have a scale VL Niagra and use trucks that are spaced a short distance apart - it doesn't look right.
A good example is school buses. Years ago the rear wheels were well back near the rear end of the bus. Today's buses have the rear wheels much closer to the front with a lot of overhang in the back. I believe the reason is that the closer the front and rear wheels are to each other, the tighter curve the buses can negotiate. OTOH, they do look a little funny.
Having said all that, I think both Lionel and MTH have made great strides in the last couple of years to make larger engines be able to run on smaller diameter curves (witness the Big Boy in the 2019 Lionel catalogue running on O-31 curves). A lot of people won't like the way it rounds curves, but it does give smaller layout operators the opportunity to run larger name equipment.
