The point is that both weapons and doctrines had a different focus from country to country, and changing the weapons without altering the doctrines would have resulted in no significant gain.
The US put its emphasis on the individual rifleman, developed tactics which revolved around the use of rifle teams, and settled on a relatively weak automatic rifle for a support weapon. The Germans, on the other hand, put the emphasis on the machinegun and just utilized a newer version of an old rifle design, which was adequate in the role of providing suppression fire to allow the MG to be set up and sighted. The Soviets increasingly emphasized quantity over quality (although the quality of some specific pieces was actually pretty good), and massed firepower, with an overall shift toward high-rate-of-fire weapons to put the most firepower into the hands of poorly trained recruits for the least cost. It's not as if one country had a huge edge in small arms "quality" overall, just different priorities within that classification.
As pointed out in an earlier post, the impact of a bullet depends on its mass x velocity (unless you're firing nuclear weapons, in which case E=mc^2 does matter), with the energy transmission being related to the size of contact area only in the case of overpenetration (if the bullet stops, it's imparted 100% of its impact energy to the target). Most rifle rounds fire a fairly large bullet propelled by an even wider and rather long bottle-nosed cartridge, while pistol rounds use a shorter bullet which may be of anywhere from significantly smaller to somewhat larger diameter than a typical rifle round, but propelled by a cartridge of the same width as the bullet and not much length; generally ranging from slightly to significantly less bullet mass, with far less velocity.
A SMG uses pistol rounds. A MG uses rifle rounds. An assault rifle uses slightly smaller and shorter rifle rounds, with its bottle-nosed cartridges still considerably wider than the bullet. These provide most of the velocity of a rifle round, but are generally smaller overall, for the reduction in size and weight necessary to allow sufficient ammo to be carried, despite the much higher RoF. The higher initial velocity, coupled with a slightly higher mass versus cross-sectional area of a rifle round, give it better range than other types, because its already higher velocity drops off more slowly with atmospheric friction.
A round which fails to exit the target imparts all of its impact energy to the target, whether it tumbles, expands, or strikes something that stops it, while a bullet which overpenetrates retains some of its energy, which is then wasted until/unless it strikes something (or someone) else.
There's a lot more to "small arms" than simple rates of fire, ranges, and other numbers on a sheet of paper, many of which are hard to quantify: how hard is to reload while under fire, how much does it weigh and fatigue the user, how quickly can it be brought to bear and sighted on target with a "reasonable" amount of accuracy (rather than absolute accuracy under controlled conditions), etc. Just as critically, if the weapon is utilized in a manner that does not take advantages of its strengths, or compensates for its weaknesses, it's likely to be less effective in practice than a "clearly superior" weapon.
I don't think the game needs to model the tactical advantages and disadvantages of various small arms in a "strategic" game, but such differences in approach (such as Garand+AR versus Mauser+LMG) might better be represented by various small arms paths leading to different situational modifiers: "+1 in open terrain, -1 in woods", or vice versa. Additional tech advances (increased deployment of SMGs or early ARs, etc.) could confer situational bonuses applicable only to some situations, rather than straight "+1" modifiers across the board.
