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Small V12 engines are for one thing. Smooth operation. There are several videos around with the coin test. The operator balances a coin on it's end on top of the engine then starts it up. The coin stays put. THe engine idles and revs very smooth. The power is there at almost any RPM. However they aren't economical. There are a lot of moving parts and friction points so power is lost just moving all of those parts.
Many people buy a V6 because they are smoother and offer more power yet still get decent fuel economy. In production cars in order to get V6 power from a 4 cylinder and still meet emissions you have to use premium fuel and a turbo. Generally a V6 in that case would be more economical due to the lower cost of maintenance and the fact you can use 87 octane.
People don't buy V8 engine vehicles because they are efficient. They buy them for fun or out of necessity. The new trend isn't I4 replacing V6 it is V6 replacing the V8. Case in point is the ecoboost engine. You can get crap loads of HP and torque from that turbo V6. Enough to tow with...yet the vehicle is economical enough to make it your daily driver.
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