I consider Civ 5 to be one of the worst entries in the franchise, especially in its earliest iterations where wide play was severely hampered by scaling tech costs, an opinion which I am not open to revising.
One city challenges are meant to be "challenges" for a reason, they're handicaps imposed on the player and require deft use of mechanics and exploiting the AI to win. Civ 4 and 3 also had one-city challenges and neither of those games pushed for tall play in the slightest.
Bigger doesn't always mean better when we're talking about nation-states, of course, because it is hard to get big. There's a lot of drawbacks to additional settlements historically and in prior Civ entries - in Civ 3, you had corruption, in 4 you had gold maintenance based on number of cities and distance from capital. Bigger is only better if it can be sustained, if you can adapt to the logistical and material costs of expansion. But bigger, when you can adapt to expansion, should never be INFERIOR to smaller. That is nonsensical and in Civ 5 with scaling science costs and the strength of the Traditional social policy that became the case.