Arcing will not accure just because the cap is small, look at Summit Racing for any High output ignition and 90% of them use the small diameter cap. And if you read the parts list in the greasygringo link, he used a GM HEI module, not Pertronix.
The small 2.8L electronic distributor seen in your link is not a HEI, it was a computer controlled unit that is easily modified. All HEI distributors use a big cap. Some of the six cylinder models used a short cap with coil mounted to the engine, but still the same diameter cap as the other models.
Whats with all the high rpm talk, the HEI wasn't designed as a race distributor, we only stated that it will run 6000 rpm and stay dead steady, just making a point about how good of a unit they are. 99.9% of them were for everyday cars and trucks, so why would your engine be any different. The true benefit is how easy the engines start and how smooth the idle is. They have higher output at lower rpm then a points system, so you can gap the plugs out for a bigger spark, which most of the time, makes for a better running engine.
Once up and running, a good set of points will equal a HEI in spark at the plugs, both types provide more energy then is needed to jump a plug gap. HEI will stay steadier at higher rpm, but the points will still go just as high, maybe jumping around a bit as they do it though.
I use HEI because if it ever does fail, I can find a replacement part in any town in the USA, any day of the week. As a side note, I have carried the same spare module I pulled out of a junk yard 25 years ago. Its been in five different glove boxes and still not been needed.
Joe