A lot of members here do have smaller lathes, quite a few of us have 9", 10" and 11" lathes. Some have mini lathes. Few people ever consciously think to themselves I wish I had a smaller lathe, unless they are moving it. I don't think it is uncommon for even those with a large lathe to think, if only it was a little bigger from time to time.
I think a lot of those who recommend going as big as you can is because they started smaller and found they wanted bigger. Unless you come from a machining background and have used a variety of machines it is hard to really pick a perfectly sized machine. I started with much smaller machines, and eventually bought larger. I have no regrets on buying the mini machines and I still use them for the projects I bought them for. I simply found bigger projects that required bigger machines.
The smaller lathes are still quite capable, just limited to smaller work. Even my tiny Sherline will cut steel.
Most of the readily available smaller lathes do lack some of the features of the 12" and larger lathes, like a full quick change gear box. This may also play a part, the 11" and smaller tend to be thought of as hobby machines and may make cost conscious choices. 12" is about the smallest size of "professional" lathe.
Many of the older lathes of the 9-11" size did have a QCGB as an option, but that is no longer the case, so you will have to rely on manually changing gears to do your full range of threads. This is a convenience issue, not a capability issue. It is easier / faster to move a couple of levers vs opening the cover and swapping some gears around but the material being threaded doesn't care. A lot of members here worked professionally and still have that time is money perspective, so something as inefficient as change gears is a no go for them. For somebody who does this purely as a hobby may not give the extra time a second thought.
You've also mentioned gunsmithing and 12x36 / 13x40 are very popular sizes of lathe with those doing that kind of work which may also be driving a lot of the comments in that direction.
The PM 1127 is a very nice lathe (by specs, and reputation I've not personally used one) but I understand it does require the use of change gears. It has a large 1-1/2" bore equal in size to the PM 12" and 13" lathes. It has a D1-4 spindle which is preferred over the threaded or bolt on chucks used on most of the 10" and smaller lathes. It does have a shorter bed but if you don't plan on doing rifle barrels, that is likely not an issue.
The PM1127 is about a foot short in length than most 12x36 lathes.
Something else to consider particularly if you have done wood working, is on a lathe the work is largely contained within the foot print of the machine. Unlike like a table saw where you may have oversized stock to account for, you don't need a lot of room around most metal working machines. Coming from woodworking, it took me some time to accept that I basically just had to find room for the machine.
In addition to the mill and welding table, make sure to leave room for a metal cutting powersaw of some sort. Most new people seem to forget about this (I did) and relying on an arm powered hacksaw gets old fast.
Anyway I can be long winded but don't be discouraged if people are pushing you towards a machine bigger than you feel you have the room for. Only you know the limits of your space and budget. I will leave you with two photos from my shop though as some food for thought.
View attachment 327801
View attachment 327802
These are my original mini-lathe and mini-mill with the (still small by machine tool standards) larger machines I eventually added. When I started out I was sure there was no way I could fit machines bigger than the mini-machines into my house. Necessity finds a way (holiday decorations and gardening tools can live just fine in a shed instead of the basement
). My larger mill and lathe are of a similar size to the PM1127 lathe and PM25 mill, I am quite content with them.