Originally posted by falconeye For the sake of your arguments clarity, let me say that this is technically false.
Two lenses made for different sized image circles but of given equivalent specification (read: rendering the same images and image quality) have equal mechanical spec (size and weight) and its price of production monotonically decreases (rather than increases) with sensor size. Please refrain from argueing about this established fact (should you sense an urge to do so).
Of course, full frame lenses tend to be larger than their equivalent counterparts from the APSC domain, i.e., they tend to be non-equivalent or more specifically, better than equivalent.
Btw, this is where I see an important niche still to occupy for Pentax in a full frame world: Provide "APSC-style" lenses for full frame, small and covering the FF image circle.
Adding in the criteria of:
Quote: "...but of given equivalent specification (read: rendering the same images and image quality)"
...is of course the issue.
The market seems not to care very much about this equivalence. In mass consensus, the entire photographic industry moved this way because the vast majority of sales and gross revenues are for snapshots.
That's an established fact.
The equivalence is a false assumption of market demand that is only pursued by a few, very elite users. And Sony and Leica and Canikon all price it that way. The RX-1 has a true FF f/2.0 lens and is a full 2 stops (I know you would like to get away from f/stops, but here it ties into the vernacular). So the Ricoh GR has APS-C and is an f/2.8 lens for an equivalent to the Sony of f/4.3 and less DR etc., you're "better than equivalent".
You know what? 99% of all photos are viewed online now. People are starting to get you don't need FF and the suppliers are pricing it high on purpose to max the ROI from APS-C and leverage gross profits from FF. The perceived IQ between a true f/2 and an equivalent f/4.3 is more than good enough at the right prices.
With the Sony it's basically a huge chunk of awesome optics that still will not fit into a pocket. The GR fits in the pocket. So an economic trade-off is made and the loss of the equivalence. ISO gains have a made a lot of the need for fast glass moot. Most of the discussions for shallower f/stops revolve around playing with ultra-shallow DOF.
And you still have to corral the issue that zooms make the market, not primes. Fuji found their X-series stalling in sales because they don't compare to the mass market DSLR's without a zoom option. This is another equivalence trade-off. People hesitate to move their feet or change lenses, and will readily accept a loss in IQ and a gain in size, by purchasing a zoom. There are practical decisions that trump technical.
A market is definitely NOT monotonic.
Is there a market for a small Pentax FF with smaller prime lenses? Maybe. Maybe if you dump K-mount and move to an all mirrorless, and the Pentax has to source an outstanding (Sony RX-1 equivalent) EVF which may not come cheap especially if it come from out-of-house. Dumping K-mount is a HUGE risk. DSLR's have a proven track record and have been Pentax's bread and butter. Ricoh bought the K-mount.
If they stay with K-mount all sorts of other issues converge where the form factor cannot really get that much smaller, probably something between a K-5 and a D600. So the gains are incremental on the whole of the form factor, plus the FF OVF is going to be larger in any case to do it right.
As for the lenses, lots of discussion there on other threads about the capabilities of the above-35mm current DA line-up. the real issue will be on the wider end and for that we circle back towards mirrorless (and get all tangled up in sensor microlenses).
I think the real problem is that Pentax cannot find enough buyers for that concept at a $2,000 FF body no matter how small the lenses are, how innovative the form factor, and whether or not to Pentax is more like Fuji which has to make the best out of APS-C and hope the market has actually mostly moved on at the value end from FF "equivalence".