There is a growing trend in production katana for the habaki to be very small and precisely fit the curvature of the blade. There is a growing trend toward believing this is right, or normal, or proper. BUT unless a blade exhibits o-funbari to begin with you cannot make the habaki follow the curvature of the blade and still serve its purpose.

In addition to creating a tight seal at koiguchi it is the function of habaki to align the blade inside the saya vertically and horizontally such that the actual blade "floats", resting upon the habaki and kissaki inside the saya while no other part of the blade touches the wood. This is the main reason why katana can go for decades without need of a polish. Sometimes centuries.

This is accomplished by the oversized nature of the habaki at the base and it's relationship to the koiguchi ana.

Did you ever look at a traditionally polished katana and notice an area of the mune near the kissaki that is given a very matte cross-polish?

Conventional wisdom says this area indicates the place where the kissaki is no longer fully hardened. But we know better than that; we can SEE where the hamon turns back in boshi; exactly where the hardness stops. It is typically nowhere near the end of the cross-polishing.

Others will tell you this is so the kenjutsuka can always tell where the tip of the sword is. I do not think so; hold your sword out in front of you and actually LOOK for that area. Stare hard at it. Now move the sword (but do not lose sight of that area). Probably not. Besides, we already know where the tip of the sword is - right there at the end of it.

Proper fit of saya to blade is such that the blade slides into saya on the burnished spine and when the habaki seats the blade rests upon the habaki and upon the boshi (just about where that cross-polish is). What is the first thing you feel when thumb unseats habaki just prior to nukitsuke? That is right, you feel the blade drop down onto the mune inside the saya.

A couple more quick tests for proper fit:

Immediately after popping habaki out of koiguchi, say maybe 1/8 inch, you should be able to press down gently on the tsuka and feel the kissaki rise up and tap the top of the saya.

Once habaki clears koiguchi completely you should be able to move the blade left, right, up down and twist from side to side (again, gently) with free play in all directions.

Simple, no?