The think that makes this scaling "bad" is that moment of inertia is going down faster than everything else and this means the required control frequency goes u

The think that makes this scaling "bad" is that moment of inertia is going down faster than everything else and this means the required control frequency goes up. A Falcon-sized rocket may only need to correct its course 50 times a second while a 3-foot scale model would need to do it 10x faster. This means your sensors need to be faster, your guidance computer has to run faster, and the actuators have to be able to respond faster. The hard things on the other side tends to be power requirements, for exactly the same reason. Mass scales up as the cube of size, including the mass of the thnigs you have to move. Although you don't have to move them as fast, the net effect is still that your power requirements become very large for large-scale vehicles.