In defence of the population changes:
I think when discussing the equivalency between Terran populations and Earth, it is important to recall that Earth has 7.6 billion people spread over 195 countries. This proposal gives Terra a world population of 4,346,820,505 over 59 states. This gives an average of 73,674,923 per nation in Terra. Caeteris paribus, if there were just 59 states on earth, the average would be 125,423,728.814 per nation. In this sense, the population changes are almost conservative.
I think it could be realistically assumed, if Earth is the absolute model for Terra, that the remaining 3.3 billion individuals live in the "developing world." In fact, people in the past have been very liberal with populations in the developing world. For example, the wiki entries for Kimlien (130m), Hanzen (180m), Utembo (185m), Suyu Llaqta (240m) all present populations much larger than any of the current Great Powers. Despite this, I am not aware of a single instance in which a controller has argued great military or economic power on the basis of their population.
Continuing on this track, is it not widely accepted that American (pop: 311.6m) military power is superior to India (pop: 1.3b)? There is a disparity of over 4:1 between these two powers. In Terra, with these changes, the lowest population great military power (Vanuku, pop: 100m) and the highest population nation (Indrala: 218m) have a disparity of just 2:1. The point here being: population is not the most important determinant of military strength, and more that this, population disparities are much lower than in the real world.
Finally, I think that RP quality is a far more important factor in determining economic and military strength than any part of the game mechanics. I would never suggest that the game's economic mechanics (GDP) should triumph over the RP; if this were the case, Rildanor (for which there hasn't been a forum post since March 18th) would be the largest economy in the world (according to the spreadsheet). I think the same could be said with regard to population.