It's a sliding scale for priority. More space per watt takes up more space for sun-power farms, and they often cause more heat, making the eco people go nuts, what with migrating geese turning into popcorn chicken above them (</exaggeration>).
For many individuals, who just have roof-space (for instance), space is really at a premium, and increased output means more money saved / made per time period, so it can pay for itself and more over time. Power companies could go either way, as they need a LOT of space. Doubling the area they need may not sound too good to them, as land costs money every year in taxes. If land is cheap enough though, cost per watt likely wins out.
That's a good point, I was implicitly assuming that the lost power due to efficiency losses would be greater than the gained power due to cheaper costs.
My roof has finite surface area. If the efficiency is too low, even zero cost isn't competitive.
That's true even of commercial facilities. Various enviro groups are already trying to kill solar farms.
Somewhere in here, wire and other infrastructure (such as the frame) costs matter too.