Is lower capacity memory less prone to data rot?

There is more to that than physical size only. Generally there are some things to consider.

Few examples:
  • Early HDDs (from the early 1980s) aren't exactly reliable despite only having very few MB. The technology wasn't as mature and precise as later on
  • CDs are more prone to complete failure by scratching the label side (destroys the data layer) than the more dens DVDs (data layer in the middle of a "glued sandwich")
Currently most (all?) flash memory is MLC instead of SLC saving multiple bits into each cell vastly increasing memory capacity. That requires more complex decoding (I guess some analog→digital) and is prone to more errors opposed to "On/Off" only. This can be seen by looking at USB flash sticks. I have an early 512MB stick, no idea how old it is. Just works. It has seen countless newer sticks come and go.

Could have other reasons than data density as well: The new ones tend to become painfully hot (sometimes can't touch) when writing a lot of data and that can't be good for the flash chip and the solder joints. Old sticks didn't even have the opportunity to become hot as they are full after a few seconds or a minute.
 
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I watched a presentation by Andrew "bunnie" Huang (the guy who dumped the OG Xbox secret ROM) some years ago, turns out that manufacturers may repurpose 'failed' flash memory into smaller capacities.

So for example, a bad batch of 256GB SD cards with say 64GB worth of bad cells could be sold as 128GB SD cards.

So just because you buy smaller capacity flash media, it doesn't necessarily mean that every cell is being used.

Slides:
http://bunniefoo.com/bunnie/sdcard-30c3-pub.pdf
 
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CDs are more prone to complete failure by scratching the label side (destroys the data layer) than the more dens DVDs (data layer in the middle of a "glued sandwich")
That's really interesting. I never thought about that, but it makes sense.
 
I know I'm late to this thread, but another aspect missed is that older flash memory (which, by definition, would have smaller capacities) would have been manufactured on larger transistor nodes. Larger nodes used for flash memory results in less voltage leakage and therefore better data retention.

Similarly, MLC didn't become a thing until the late 2000s and TLC wasn't a thing until the early-to-mid 2010s. But keep in mind however that worn flash memory also has worse data retention, and smaller capacities means you'll have likely rewritten a given flash memory cell more often.

This does mean in practice that lightly-used early to mid-2000s flash memory can last upwards of a decade (or decades - plural!) without suffering any bit rot at all. So that old GameCube memory card or an early flash drive measured in megabytes rather than gigabytes that you only rediscovered 2 decades after it got buried in your closet somewhere is much more likely to retain all of your data perfectly than the 32GB microSD card you left in your old-ish smartphone when you discovered your new phone lacked an SD card slot.
 

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