Torque and horsepower are directly related. You can't have one without the other. The reason small engines have relatively low torque is that they have low horsepower at the lower rpm's.
Example: Build a 300 horsepower V-6 and a 300 horsepower 454 V-8.
They have the same horsepower, but not the same torque. Why? Because the larger engine hits its hp peak at a much lower rpm. A big-block engine might have, say 300 hp at only 2000 rpm's.
No way a normally aspirated small engine can accomplish this. This is why larger engines have sometimes have lower horsepower but much more torque. This is also why they feel more powerful in the "seat of the pants".
The answer to the question "which is better, torque or horsepower" is simply, both. Every engine is a compromise based on what it was engineered to do.
It all depends on what you want to do. If you want to accelerate, then a lower rpm, high torque engine is the way to go. Go to any local dragstrip and look at what the majority of racers are running.(I'm not talking about professionals, I mean the real life racers). The vast, vast majority of powerplants are large displacement big block Chevrolets. Why? Because you can limit them to between 6 and 7000 rpm's, and build plenty of reliable, maintenance free horsepower/torque. Sizes from stock up to 815 cubic inches are available depending on the size of your wallet.
Go to other types of racing and you'll find higher revving, smaller engines capable of up to 15,000 rpm's. It just depends on what you need.
As far as turbo and supercharging(and nitrous) go, they are great because they make the engine act like a larger one by forcing much more air into the combustion chamber than the engine could ever suck in normally. If someone argues that a forced-induction small engine is better than a normally aspirated large engine, you can counter by saying you can always force-induct the larger one, too.
In terms of pure power, with everything else being the same, bigger engines are always better.
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