Why do steel hulled smaller yachts use small engines?

The short answer to the question in your title is that steel is heavy, hence used for displacement (=slow) boats.
With planing (=fast) vessels, efficiency is inversely proportional to their weight, so they are built either in GRP (mostly) or aluminum (more rarely).

But ref. your other question on fuel burn, every boat is more economic when used at displacement speed, regardless of how fast it can go.
In other words, it obviously takes half the time to go from A to B at 16 knots rather than at 8, but by and large it will also take twice the fuel - if not more.
And that's always true, regardless of number of engines, power, hull material, whatever...
In other words, speed costs money!

The answer to question 1 is tat the boats you are looking at have displacement hulls. Most of the recreational boats on these pages are semi displacement or planing hulls. These are popular because they go faster and behave better at anchor or tied to a dock.
A displacement hull cannot go faster than 1.34 times the square root of its water line. Otherwise it is trying to climb its own bow wave and this would require enormous added power for little added benefit.
Semi displacement hulls are designed so the engines both lift the bows as well as pushing the boat forward allowing for the extra speed. But this lifting requires extra power and semi displacement hulls need therefore to be relatively light and have larger engines as much for the lifting as the speed.
Displacement hulls need only to be pushed and this can be done with modest horsepower. Extra horses will do you little good.
Of course one could design a steel semi displacement hull but this would be very heavy and need a lot of power to lift so most semi hulls are glass, aluminum or occasionally carbon.
In sum, adding bigger engines to steel displacement boats than they need to achieve their hull speeds seems fruitless.

A long time ago, I ran steel or wood tugs on western rivers. At flood stage when there is a lot of debris, I never found it a problem to dodge logs, trees or other debris. You don't need steel. If your cruising is primarily rivers, buy a planing hull. You'll be happier with the speed. Planing hulls are ok on the ocean and most yachts travel after viewing the forecast.
If you buy a longer boat, your hull speed goes up. I have a semi-displacement hull with a hull speed of 12+ knots. And I can make that speed with twins of less than 200hp.

Good comments by all. A few points: (1) I don't agree with "... These are popular because they go faster and behave better at anchor..." Unless you're talking about zero-speed stabilizers, IMHO displacement hulls ride better at anchor (they usually sit lower in the water by design and are heavier so roll less (2) Steel yachts usually have long range cruising in mind and therefore the smaller engines have better fuel economy = greater range (3) Glad you are paying attention to bridge clearance, but also LOA can be problematic for dockage (4) While the odds of getting whomped by debris or fallen trees is probably minimal for the inland waters, you still have pilings, rocks, shallow draft, fires, and other boats to contend with.

Bottom line is that steel hulls are unquestionably safer, but is maximal safety worth sacrificing for more speed - only you can determine your priorities.

In addition to what everyone else wrote. A displacement hull won't go any faster than the water in which it can displace (hull speed), so a bigger motor is not going to make the boat go any faster.

Hi Rick. Your post is really good . Extremely well written and well understood. You bring up many good points. But I’m a little baffled why you did not reply back? You got some of the best professional/knowledgeable people on this site to respond to your post with extremely informative responses .
I hope things are ok ? My sincerest apologies if not.
But a reply would be if some sort would be nice when you can .

Myself , I just a member as you are .

Agreed.

Can't say I disagree, I don't find everyone is fine at 6-8 kts SOG with little current. Let's not get into current and slow boats. Not anything wrong with slow boats, but before spending one's money, time, blood, sweat and tears be sure about it. The thing about single engine slow boats, that is all you got.
Curious and I agree, Rivers, Bays, Coastal, even San Fran to Vancouver BC is all very doable with fast boats as the weather forecasts and time to wait for one's window make is possible, do you have a make and model or range that you like?

Not only did he not reply back, but he logged off of YF right after his post, and he hasn't logged on to YF since.

Lost in space