>one third for each of 2 size categories of difference
That is a horrible idea, at least the way you described it and without heavy revisions of the rest of the system. Lategame monsters can be Gargantuan, if not Colossal. Medium adventurer druid vs a Gargantuan dragon will deal 1/27th the damage. That is like dragon having DR f#~#-you/-. I mean, it turns 50 damage attack(quite a fair bit of damage) into 1.8, 1 rounded down(less than a commoner deals at lv 1). Even if druid can deal, let's say, 400 damage with their pounce of doom, that will only be 14 damage to the dragon. Given their 300-400 HP, it means that martials will ~never be able to kill big monsters.
And Small halfling druid vs a colossal BBEG? Yeah, forget it. 1/243 damage means that even if they deal 2k damage on a full attack(is that even possible?), it will only be -8 HP to the boss. Your contribution to the fight can be countered by a lv 1 mook casting Infernal Healing on their boss.
David vs Goliaph? More like small pile of guts and blood vs Goliaph.
One of the things we're intending to figure out is some consistent mechanics for truly enormous size categories. We might drop the naming conventions for size and give creatures a size rating (so fine might be size 1, while a human might be size 5 (fine = 1, diminutive =2, tiny =3, small=4, medium=5, etc), so we can more readily give mechanics that reflect truly titanic monsters without having to scour dictionaries looking for anything synonymous with "bigger than really f***ing huge".
I hope to include some mechanics for scaling larger creatures in combat and some sort of benefits for doing so, which would finally allow you to do things like ride on an angry wyvern while it tries to buck you off, or climb a colossal giant Shadow of the Colossus style. Aratrok had been putting together some early drafts last we spoke about it, but that's been a while.
Mostly because when you get right down to it, monsters get big but not that big in D&D. This was the visual representation of the size categories in 3.x, but dragons aren't even that big at colossal size, based on their spaces.