I've always been under the impression that the N64 was more powerful than PSX (considering PSX is 32 bit and N64 of course is 64 bit). However the file sizes of PSX games are much bigger than N64 games (even with the same game for both consoles). So I suppose my question is how can the N64 be more powerful when its game file sizes are much smaller.
What means to be more powerful?
That is an important question, and you should provide your definition to it, because on it depends the answer to your question.
Having more space for games (as in CD vs old cartridges) means you can cram more data into it, but it more data does not imply more power.
If you are talking about processing power, then it is a completely different thing and it does not depend on size of your data medium.
Actually, if your have less storage space you usually need to compensate with processing power. You need to compute more things real time, generate textures on software, use stronger compression algorithms, etc.
If you have more space you can store precomputed data, like lighting maps and textures, that would help achieving better results with less CPU power.
Of course, with more space you can store more video (PS1 games were plagued of videos).