I love my small tanks :P Honestly, I don't think he minds whatever size he's placed in, as long as he's got good food, a nice flow and a niche to rest in away from attention (like behind the driftwood).
when he was really little he used to zoom around the 2.5gallon, and I'd be thinking even a 10 gallon's not enough for this fellow. But Then he got older and stopped zoomin around and doing excited puppy laps in the 2.5. he'll slowly patrol his territory and usually rests somewhere behind the lava rock until I come home, then he comes out to greet me.
So now I look at the 1 gallon and Kuro going all zen in the filter flow and think, meh, as long as he likes it.
He really doesnt bite his tail, just tears it on stuff... like the driftwood. I dont really mind him doing it. The water's clean and he's never gotten sick or had an infection, so as long as it doesnt hurt him, I just let it be.