I love going to events that are standing room only. It's as if everyone's energy is echoing off the walls. Unfortunately, the opposite is also true. When an event is hosted in a venue that's too big, the extra space sucks the energy out of the room. So, if in doubt, err on the side of choosing a venue that's slightly too small.
In addition to size, be sure that the space sets the right tone. It's hard to have a relaxed reunion in sterile convention center and it's hard to take a professional presentation seriously in a run-down gymnasium. When there's a mismatch of expectations, people go home. And as numbers dwindles, this compounds until there's no longer critical mass, defeating the purpose of the event in the first place. Don't settle for a venue just because it's available.