^agreed.
(calling IDC?)
couldn't intel in theory press ahead with a smaller node with possibly more flaws but the dies would be so small that a lot would still be salvageable to press the tech advantage even more? e.g 14nm (or whatever) in 2013/14? where it's got too many flaws to get decent yields from your average intel cpus but tiny SOCs would have decent enough yields?
Yep, definitely. That's actually how a lot of IDM's manage their timeline for releasing a new node to manufacturing.
Those IDM's will do a conditional release based on the yields of small diesize designs (the 15-20mm^2 stuff) and in parallel to ramping that device to volume manufacturing they work on the yields (the D0 stuff) which in turn enables manufacturing on the larger die chips.
At TI there was probably a good 9-12 months lag between the leading edge of a node release (on the coattails of qualifying a small 10-15mm^2 chip for production) and the time when we attempted to put large chips (>300mm^2, the SUN chips) into production on the same node.
The bigger issue though, the gating issue bar none, in releasing a process node is not the economic kind (not the yields) but rather the technical kind (specifically the reliability). The last year, year 4 of 4, allocated towards developing a new node is spent attempting to get yields up while at the same time attempting to tune the process integration so as to hit the reliability specs.
If you can't hit the reliability specs then it doesn't matter whether you are making a 5mm^2 chip or a 500mm^2 chip, regardless the parametric or functional yields of those chips, the product is unsellable.
And so that is the fatal flaw in your proposed line of thinking, its not enough to just say you are going to rush a newer node into production while limiting its use to the smallest of small chips so you can outmaneuver the numbers game that is D0 and functional yield.
You still have to deal with the intrinsic reliability of your process integration, and since that tends to be the bigger issue from day zero the chances of your new node having no reliability issues but still having a functional yield issue are pretty slim. (it takes a TSMC to pull that off

)
So you can still prioritize the timeline to accomodate smaller die sooner and larger die later, but the process technology itself needs to have already been optimized to meet the reliability spec and that alone takes the lionshare of R&D efforts in the last year of a node's development.