For me, whilst the size of the nursery is clearly a benefit, ultimately, it’s what you do in terms of development of the cream of the crop from the nursery that matters - a bigger nursery just increases your chances of finding some good ones.
Penrith are dominating because of the systems and development programmes they have in place - their juniors are coming into grade fitter, faster, stronger and with better basic catch/pass/tackle skills than many established NRL players at other clubs.
They are then also coming into an established and well polished system, with very specific requirements from them as an individual and playing alongside other high quality players - Penrith have got the whole system right, that’s why they’re reaping the rewards, and I doubt a smaller nursery would have that much impact on them now that the fundamentals are in place. Bigger nursery just improves their odds.