Your program director is perpetuating a sentiment shared by many program directors at large, academic programs. Unfortunately, there is SOME truth to his statement, but let me explain. I heard the same thing from my program director (at a large academic program) seven and a half years ago. He said basically the same thing and told me I was "too competitive" to consider going to a "community program".
Training at most smaller programs is not limited. I trained at a program with a total of 10 residents (including interns) with 26 staff with every subspecialty represented except tumor. I finished with 2500+ cases as first assist and was doing total hips/knees as a PGY-3. I did very well on my in-traning and passed part one with flying colors. I am 18 months into private general practice and am thriving, as I am as busy as my partners. I am by no means a genius sp? (I'm not even sure how to spell genius) or God's gift to surgery. I am merely a product of a solid training program. I am also not the exception, but the norm from my program. That being said, the program I graduated from is currently in a fight for its life to stay accredited by the RRC. I spent the last two years of my training worrying about whether I would graduate from an accredited program. Why? The details are way too involved to get into on this forum. Of course, the RRC has its "reasons", but most close to the situation sum it up in one word: Politics.
I would BEG your program director or any other large program chairman to explain to me how my training was inferior, especially when compared to academic programs that have twice as many residents as staff. Residents are standing 2-3 deep and logging it as a "case" as they waterski for three hours, and still only end up with 1200-1500 cases by graduation.
I'm certainly not implying that all, or even most, academic programs are as described above. Most community program chaimen would admit that most big, academic programs provide quality training. Unfortunately, the converse is not true. Valid or not, there is a sentiment among many academic programs that the training at smaller, non-academic community programs is inferior, to the point that some in the academic circles would like to see them shut down. For evidence, all you need to do is look at Simon's editorial a few years back in the front of JAAOS about the "critical mass" of programs, and how smaller programs can't adequately train orthopods. It was blatently biased and opinionated, yet presented as a fact. Unfortunately, I do not think he is alone in his opinion.
In summary, your director's comments about the quality of training at smaller programs is ludicrous, but there is something to the fact that smaller programs may have a tougher time maintaining accredidation unless they are politically well connected. Most are in no danger of closing during your training, but of course, neither was mine. At the time I made my rank list, my program had most recently been granted the maximum accredidation. I had no reason to think they would be fighting to stay open halfway through my training. My best advice is to give the smaller programs a look, but make sure the ones you rank high have directors that are well connected. You will have enough to worry about as a resident. The LAST thing you need is to add in the fear that you may not graduate from an accredited program and may have to change programs (or, worst case spend another year in training). Believe me, I've been there.