Like Suzi says, bigger knuckles should do more damage. The force of a punch comes from an equation you may know: Force = Mass x Acceleration. The size of your knuckles contributes to the mass, but if you punch faster you will also have a more forceful punch.
I wouldn’t get into any fights with someone who has smaller knuckles but is faster because they are likely to case as much damage. In fact I would say avoid fights altogether! 🙂
But isn’t there also the fact that the same amount of weight exerted over a smaller area has more force? The famous example our Physics teacher used to give was that a woman standing on your foot with a stiletto heel would do much more damage than a much heavier elephant standing on your foot, because the area of the stiletto heel’s end is so much smaller than the area of the sole of the elephant’s foot. So, even though the woman is much lighter than the elephant, the smallness of the area of her heel magnifies the effect of it on your foot, and she will probably go through it while the elephant might not.
By that principle, of two people with the same strength of punch, the one with the smaller knuckles (less area) might do more damage because the force is more concentrated. Isn’t that right?
However, I think that the strength of the punch would probably be a bigger effect than that, as strength is likely to be more varied than area of knuckles.
So the moral of the story is: if you don’t want to know whether area of knuckles or strength of punch actually matters more, don’t get into fights!