That extra bit of casualties is trivial, plus as already stated, the example uses 29 width divisions which no one has suggested is a good size. There are also those, including myself, talking about having more than one size in your army which throws these kind of micro analyses out the window. Don't think single battle. Think entire campaigns and wars.But you still take casualties/equipment losses on that extra 9% over width. You are paying an extra 9% in production cost on all of those divisions, but they fight 17% worse than they should for that cost.
So while the tactical penalties are not necessarily killer for the reasons you state, on the larger strategic level, you are wasting a significant amount of your production.
Just to illustrate the point, if you were hypothetically to get this same penalty in every battle (which of course you won't, but for the sake of argument), it would have the same effect as if you didn't use 17% of your factories.
Well we have different philosophies. I know many playing HOI have been conditioned not only by the forum and by the wiki but also playing EU etc. to value that combat width more than I think is appropriate. When I start losing in MP because of the way I treat width then I will reconsider. In the meantime, I continue as I have been.