You are incorrect.
Velocity is used to spool the turbo, and the bigger the downpipe the better. You want to get rid of the exhaust as fast as possible so the shorter and bigger, the better. The only thing you want to watch out for is turbulance. You dont want to jump from 2.5" straight to 3.5". You need to transition the air similar to the way a cylinder head works.
As for Jacks question, the PTE housing limits alot of our choices. I dont think you would have seen a noticable difference, and the fit would have been a bitch. To make 3.5" work we would have had to transition right at the outlet, and you would not have been able to access the bolt holes to attach the dp to the housing. Then you have to deal with the gap b/t the frame and bellhousing. The outlet of the housing even on the Q trim was only 2.75", so stepping it up to 3" should be enough.