It does indeed cancel out. That is: except the better detail and less obvious 'film artifacts' you get when you record a larger image on film that is subsequently enlarged less.
Originally Posted by BetterSense
So yes, shooting at larger magnifications is better (but - depending on the difference in film format, of course - only marginally).
It means, however, you have to use more difficult to handle larger format equipment.
And that's what behind the advice to use 35 mm format.
But it is a clash of the two approaches i mentioned before: the first is the compositional/format driven one, which comes with the benefit of better image quality when you step up in format. The second is the magnification driven approach, in which (as long as the subject fits in the format at the desired magnification) favours the smaller format (for greater ease of use with the same image quality).
So what to do is something that has to be decided on a case by case basis.
On top of that, you get all those considerations David mentioned.