Never having been entagled outside of training scenarios I can't speak from experience, but it seems to me that the only place you're likely to get hung up on in the back would be a) on your first stage/tank valve b)the base of the tank (or tanks) and c) around one of the dingle balls hanging off of a dump somewhere. You should be able to reach all of these locations so a long knife isn't really necesary, also having to accomodate a long blade could make things quite awkward, especially if you happened to be in a position where you can't stretch out.
Jabbing blindly around my hoses and BC with a large (or any) knife is also not something that I'd really want to be doing and I think that a smaller blade allows for a bit more presicion.
In the end it really depends on your application, for prying or digging purposes, small knives are pretty much worthless, but I think for the majority of divers, a small knife on the BC is all that is needed... unless there are watermelons about.
Edit: Also, good luck cutting anything on you back with only one hand, floaty line tends not to be very helpfull. So unless you can get the line taught without using your hands it's up to your buddy, and they won't need a large knife.