My .02 (engine theory point of view -- don't have much experience in the drag racing realm)
Energy is energy. Lower the displacement, higher the cylinder pressure needs to be to achieve the same output. For some engines, like the 4G, 2J, S5x, etc have the sealing capabilities with great combustion chamber design that can effectively handle it (on pump gas, too). There are some notable 80's F1 engines from Honda and BMW rated in the 1000bhp range from 1.5L and 6 cylinders. The thing to keep in mind - these engines made their power from 6k-10k RPM. Great if your application and gearing can take advantage of it.
The other side of the story is accepting the physics of turbos, mainly the turbine. There are two accepted components that contribute to spinning it, mass flow, and heat (enthalpy across). Mass flow into the turbine is equal to mass flow into the intake + fuel mass. Squires quotes this as one of their main selling points - but they somewhat abuse it neglecting the other component, heat. Mass flow is the same through out an engine, but temperature has changed from the intake to the exhaust. Having a higher concentration of heat leads to a higher concentration of pressure, which is stored energy that aids the turbine.
Back on topic, going to the Smokey Yunick side of things, a larger displacement motor with lower cylinder pressure outputting similar power is going to be generally accepted as the safer choice. Generally, it will have a higher mass flow rate (assuming it's a performance built V8) then a smaller displacement motor. That translates to more mass flow available for the turbine. Hopefully Mark and Anthony with APS TT Vette's at IPS will let us sneak a peak at their dynos - if they do, study it, compare it to similar horsepower smaller displacement engines along with those having less cylinders.
The largest problem with displacement usually means an unfavorable bore/stroke ratio, or a large bore. That can really drive up weight and stresses in the rotating assembly, which often limits the max engine speed. So, how do you combat this -- increase the amount of cylinders. There's a reason the Veyron uses 16, and carries a healthy displacement of 8L.
Like anything, I think there's a healthy balance between the two.