It's nice to hear from fellow F295'ers here on APUG. I've personally used many different sized formats of pinhole cameras, and consistently find that larger negatives yield superior image quality - with the cavaet that by 'superior' I am suggesting image detail and, to a lesser extent, tonal range are better with larger negatives, along with no evident emulsion granularity for contact prints.
Of course, there are some genres of images that purposefully work better enlarged from small gauge pinhole negatives, where low resolution and obvious emulsion granularity are part of the aesthetic desired; in this respect one has to make a personal judgement about what quality of image works best for your purposes.
Back to sharp pinhole images: I shoot now almost exclusively on grade 2 RC paper negatives. Several reasons: 1) Large format panchromatic sheet film is expensive; 2) Graphic arts films, though cheaper than panchro, can't easily be controlled contrast in high-key daylight exposures; 3) Ortho paper is sensitive to shorter wavelengths, permitting a smaller sized pinhole to be used; 4) Much less problems with dust and other processing artifacts with paper negatives; 5) Paper negs can still be contact printed to yield high-quality prints.
The main cavaet to using paper negatives is the long exposure time, as compared to panchromatic sheet film. My experience with APHS graphic arts film as an in-camera negative material is that it is no faster than graded paper, and doesn't come in various contrast grades.
I have also used multigrade paper negatives, but the blue/UV of daylight activates the high contrast portion of the emulsion, making it look very much like APHS. This is why I use grade 2 RC paper for negatives. Freestyle's Arista brand is very good, and inexpensive.
One other key to sharp pinhole images: if you are shooting lots of 'close up' compositions, where most of the subject matter is much closer than 'infinity', you can get by with a smaller-than-Rayleigh pinhole diameter; most formulae for optimal pinhole size are assuming the subject matter is at infinity; when the subject is much closer, image softening from geometric optics outweighs any effects of diffraction from having too small of a pinhole.
Regarding the theory of optics and pinhole, I'm not an optician or mathematician, only a darkroom dabbler. But I believe that, without diffraction, pinhole imaging would still be possible, because the pinhole acts as a 'phase selector', isolating wavefronts of only one phase from all the light of various angles reflecting from the subject.
A final thought is about large negatives yielding sharper prints: if you enlarge a small-gauge pinhole negative to the same size as a contact print from a large format pinhole negative, the differences are very obvious; added to that is the fact that the optimal pinhole formulae favor longer projection lengths over shorter ones; so if we compare a small gauge camera with large format camera of the same angle of view, the larger format will have the longer focal length, which permits a larger F-number to be used, resulting in a sharper image.
~Joe