Its perfectly possible to pick-and-place by hand, there are jigs that make it easier (basically
a vacuum nozzle on a cantilever with a rotation control. Solder paste is applied through
a stencil, components placed, then the board heated to melt the solder.
Smaller components are not just smaller, they have lower power ratings (this often
matters for resistors as through-hole resistors are usually 0.25W or 0.3W, but small
surface mount are 0.1W or less. Conversely some surface mount components have more
power dissipation rating than their through-hole counterparts as the copper on the board
can be used as a heatsink (if there is enough area of copper).
Small components also have much less lead-inductance - for high frequency circuits
this is a really big deal (chip capacitors were invented for precisely this reason).
For instance modern fast processors require dozens of small surface mount decoupling
capacitors within a couple of mm of the package leads - through-hole capacitors would
For a decent sized P&P machine think 50 -- 500k$