You know, I think no matter how much space we have, we aren't happy with it. I love to entertain, but have never felt that the space I had, whether it was size or configuration, was comfortable for entertaining.
The house I live in now is big, the biggest one I have owned. But it's a very untraditional floor plan. A couple of years ago, I had a party for my husband's birthday. It was the first time I ever had something catered, with servers there. I was totally worried about how they would set up, serve, etc. It felt cramped to me. We used both our dining room and kitchen for the dinner, for about 25 people. I am pretty sure no one except me noticed. And my theory is, if your relatives complain about sleeping on a futon, etc, then show them a hotel. My in laws refused to stay at our last house because of the size of our guest room! They wouldn't pay for a hotel and we were done enabling them by paying for them. Thus, they missed our youngest son's graduation from HS.
I used to entertain in my studio apt. when I was single. We sat on the floor and ate lasagna one time. After a few bottles of wine, no one cared!