Several people here felt the need to show how smart they are and explain to everyone how size doesn't matter with discs.
Size does matter, and so does density.
When it comes to using science formulas in this case, mass is fairly equivalent to data, and volume is volume:
density equals mass / volume
That's a formula. And every part is necessary. Yes, density will make a disc have less space, but so will size.
The gamecube discs hold about 1.5gb I think. Which is plenty if you don't need a lot of video or other larger types of data. I know a lot of games got changed, but gameplay and such things do not need to be changed with this size limitation. graphics need to be simplified along with generated graphics and maybe even sound. But if features are removed it probably has little to do with the size limits.