Greg- thanks. Airspeed is important as it is calculated with the speed of the prop.

Sport pilot- the arguing is getting to be a drag here. I didn't want to dig out any books about it. You do factor in output power divided by shaft power input for thrust. But, that is only the beginning and you are fixated that this is the end of it. In short, it is thrust x velocity divided by thrust x velocity (prop) times velocity (airspeed). This is where the higher prop velocities of the smaller prop brings down the efficiency, as you already argued against.