This is helpful in fighting off plagues, starvation, predation, climatic changes, you name it. More variety within the population means not only a greater resistance to environmental stresses, but also a greater ability to ultimately produce distinct varieties of animals in response to new environments and circumstances. Perhaps one's level on the food chain figures into the equation as well. Larger animals are fed upon by a smaller number of species, and a smaller number of individuals of any given species, than are smaller animals. In other words, everybody nips at the little guys, whether the little guys in question eat plants, meat, or both.
Burrows are often the preferred home, and camouflage is commonly employed.
The consequent intraspecies isolation apparent in some smaller prey species may represent another factor in the higher speciation rate you observe. How much of this would apply to the Cretaceous, or to non-avian dinosaurs in particular, I don't know. When I think of a small animal today, I tend to think of a mouse or a small gecko. I welcome any corrections to preceding. No universal rules for explaining body size.