You need to look at it from a product positioning aspect. Yes its small. But Mazda is the type of company that's very concerned with cost. Cost reduction is the big buzz these days in manufacturing.
Here is what I think they were going for:
The current protege is a car known for good reliability, good handling, and good price/value. The protege is a great car, but could use more power to compete in a very aggressive market.
So they gave it more power in the form of a turbo.
But...
The car still needs to represent a good value if its going to be successful and viable for Mazda. They can't have a 16k protege in 2002, and then a year later have a 23-25k protege and expect it to sell enough numbers to justify.
Features like the 'dainty' intercooler are an obvious cost control action.
Is it a bad thing? I don't think so. 65-75% of the buyers are going to keep the car stock for its entire usable life. 50% will probably never understand what an intercooler is, does, or even care. They just want the car to start up and go quick. The other 25% would probably replace the intercooler even if Mazda made it the size of the hood!
So what do they have? Mazda now has a Good looking, great handling, reliable, moderately powerful car that's still a great value.
The 65-75% folk will love the car in its stock trim. The remaining 25% have a car that's a great base for continued modification.
I think they preformed a good balancing act and the car will be a success.