They offer the smaller tooling with .25" shank because there actually is a demand for it. There are some folks who need that combination and it's likely fine for very light duty work. That said, I personally wouldn't use that.
I'm actually trying to decide whether to use the current Amana insert cutter I have for my CNC (1.25") or to get something slightly larger for my slab flattening setup. Since I'm using a 12 amp DeWalt DW618 on that, It's not likely a good idea to go much bigger, however.
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The most expensive tool is the one you buy "cheaply" and often...