The whole size system is a massive simplification.
Absolutely, of course! A lot of d20's "problems" arise from trying to cram exponential (or log or continuous or asymmetric or bell curve or whatever) functions into a linear box. With a 'size' of exactly 1 to 20, no less!
Still it just feels like size modifiers in combat are an incomplete or poorly thought-out simplification. It seems strange to me that the smallness advantage is split between attack and defense, when it would be simpler to keep the bonus all on one side or the other and make
relative size the issue. Judging from what people have pointed out in this thread, the fact that it
is split seems specifically intended to make sure it evens out when two like-size opponents are facing off. IMHO, that's messy... but I might be saying it just because it makes it hard to tinker with
Personally, my take on it is that size modifiers to AC only apply to missile attacks, and attacker's size has no bearing on the issue.
Now this is interesting. It certainly simplifies things, to just drop the modifiers in melee. I rather like it! Have you used this in play?
I might still give larger creatures a
slight disadvantage in melee, perhaps just a straight "the bigger size category creature take a -1 size penalty to AC" and just leave it at that. It's easy, and works as well for dragons vs men, as for cats vs mice (with little swords and plumed hats, of course).
Grappling's still an issue, but that's another topic.
What annoys me is the way that 3e kinda sorta tries to be realistic, but does it in such a patchy half-@ssed way.
Sums it up nicely! And yet, every couple years, when I think about it, I open the can of worms again and start picking through the mess

Though in all fairness, they did get a few of the simpler things right. Like Jump checks.
Fortunately there's people out there who've already done a lot of grunt work and made houserules available as a (well appreciated!) starting point for the less adept DMs out there, like me! (@TS, I know you've made yours available. Thanks to you, and all the others who have done so!)