I think there's a lot of ways to interpret and determine benefits to the varying types of tire. Let's take a look at a few of them. First, a 35" tall tire in both 10.5" and 12.5" widths - when at the same air pressure - the 12.5" is going to have 20% more footprint on the ground. That's basic math. More footprint equals more traction on hard surface and soft surface. If you are intentionally trying to dig down to a firmer surface underneath than I guess the narrower tire is the way to go - but that seems to be counter to the whole "air down" mantra in the first place - which is rule #1 for sand driving. I'm also a drag racer so the "big tire car vs small tire car" debate is very relevant. A smaller tire (10.5"W) is lighter and as such, if the vehicle can get adequate traction - it will run lower ETs and higher speeds than a big tire car. However, that traction is much, much more difficult to attain with the small tire vs the big tire in high hp applications. A big tire car is also far more stable at high speed - again traction and footprint coming into play. FWIW - I have a big tire car with 14.5" wide slicks because I like mitigating the chances of me putting my race car into the wall - which happens a lot with small tire race cars.
//
Second, factory supplied tires are typically grossly undersized and underrated for trucks and SUVs for a reason - sales. A P-Rated tire with a soft sidewall that is only a 31" tall tire will ride softer (more like a car) and be easier to get into the cab (more like a car). Why do the manufacturers do this? Because, in most cases when someone is buying a car - it is a couple or family- and the woman's opinion typically influences 94% of the buying decisions (hence cupholders everywhere - there is a direct correlation). Yes - I used to work on the corporate end for a major auto manufacturer.
//
Third, stability on a full sized vehicle seems like it would be horrible with a tall skinny tire. I know my Avalanche improved dramatically when I went from the stock 265/70-17 P-Rated tire to a 265/70-17 E-Rated tire. Then when I jumped to 285/70-17 E-Rated it got even better. But, when I went to the 35"x12.50"-17 E-Rated tires currently on it, it not only completely stabilized the truck, but it actually LOOKS like the right size tire on it now (which blew me away since I was expecting the tire to LOOK huge on it).
//
I agree there is a point of diminishing return regarding tire size vs performance and fuel economy, but I think that point varies widely depending on vehicle size/weight and type of terrain being used in.