It absolutely is the answer. At the point where somehow this is made possible, we can get into the detail of permaculture and animal welfare and wed all be better off for it!
If you read some of the old farming manuals published in the UK from the 20s to the late 50s, you can see thats exactly what the average farmer advocated even back then. Smaller patches, hard work, and bounty for all. And, if the permaculture principles extend to eating your own produce, most people would become more balanced omnivores again, I would think. After all, with all best intention, I cant grow high protein veg up this way year round to feed myself, but i need it if im going to be gardening 4 hrs a day!
I honestly think it would be a happy result if small holdings actually became the norm again, but for it to happen, I think small family farmers need more support from the wider public rather than pointless villification. It would be good for the public to be against big farming, and in support of more sustainable approaches. It would pave the way to the viability of small holdings providing the necessary produce (animal and vegetable).