The phase diameter effects the drag, combine that with the momentum and it'll govern the droplet trajectories. Not sure why the solver would diverge with a really small step, typically if the time step is too small nothing happens. Note, as you decrease the diameter below about 10microns the relaxation time means you're near enough modelling a mist, and we often use the species model for that.
Were you resolving VOF down to 10microns?
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