Brett, I'm not mis-interpreting the book. I think it has to do with the smaller diameter of the cog. A smaller diameter has a smaller radius therefore torque multiplication may be different. Chainline, as mentioned in the book is a different topic.

This same principle happens to cars on a dyno. If a car is putting down 300 rear wheel HP and you change the gearing or diameter of the rear wheel HP numbers change. If doesnt make sense but it happens.