Why are hub shells such different diameters?
A smaller diameter hub is lighter (and likely cheaper).

A larger diameter hub has several advantages:


The bearings can be larger
Since the spoke flange has a larger diameter, it also has a larger circumference, meaning that spoke holes are farther apart.  This reduces the stress on the spoke flange with heavily-loaded bikes, and also makes higher spoke counts practical.
Related to 2, the spokes, for a given "cross", leave the hub at a more oblique angle, meaning that the force of the spoke is pulling more tangentially and less radially.  This again reduces stress on the spoke flange and also increases the rigidity of the wheel against torque.


A non-obvious disadvantage of the larger hub, when it gets MUCH larger, is that, for 3 or 4 cross, the spoke arrives at the rim at a definite angle.  Unless the rim had been drilled at a matching angle, this increases the stress on the spoke where it enters the nipple, increasing the chance of spoke failure.  But this is mostly a problem with geared hubs.

It's pretty much tradition to have larger diameter hubs on touring bikes and tandems.  Not sure to what extent this is a practical measure vs "expectations" -- the larger flange looks like its built to be rugged, while the small flange looks "light on its feet".