I agree, it's an oddly low threshold. The latency differential of NFS vs. S3 is a couple OOMs, so a threshold of ~10MB seems more appropriate to me. Perhaps it's set intentionally low to avoid racking up immense EFS bills? Setting it higher would effectively mean getting billed $0.03/GB for a huge fraction of reads, which is untenable for most people's applications.
Once upon a time S3 used to cache small objects in their keymap layer, which IIRC had a similar threshold. I assume whatever new caching layer they added is piggybacking that.
This keeps the new caching layer simple and take advantage of the existing caching. If they went any bigger they'd likely need to rearchitect parts of the keymap or underlying storage layer to accommodate, or else face unpredictable TCO.
