Current CCD chips are tiny compared to a negative which i find odd. Wouldnt it be more advantageous to focus the image on a much larger area but keep the pixel density? One would think so.

First, wellcome onboard.

It's a matter of price.
Silicon prices skyrocket with size (since you're kind of a computer geek, for sure you know CPU manufacturers try their hardest to keep chip area as small as possible).

So, there's a very real price barrier in digital - small CCD's won't have the same quality of large CCD's; large CCD's are VERY expensive.