When should I avoid a small ship strategy?
In the base game, always.

Having a large ship full of useful tiles helps you deal with every situation better: guns for enemies, crew for abandoned ships and stations, engines for open space, cargo space to loot planets. And if something bad does happen, a large ship is more likely to be able to handle the mishap and keep going.

If the cards look dangerous, of course, you might want to take your time building and take appropriate precautions. If there are lots of small meteors, be careful about exposed connectors. If there are large meteors or enemies, deploy as many guns as you can. If it looks like you might take cannon fire--or meteors you can't handle--look for a shield and batteries.

Even if the worst happens, all that happens is you lose a few components, turning your large ship into the small ship you were planning anyway! If you're playing a ship with insurance, this is a paltry loss. If you're playing one without, it's a bigger deal, but if an opponent has a successful and safe run while you take a beating, you're going to have a difficult time catching up anyway, so you might as well plan for success.

In the expansions, there may be times when having a certain type of tile is a liability, but even then, more ship is usually better.