Nitpick: The first attempt ran out of hydraulic fluid (for the guidance fins), not out of propellant for the RCS thrusters.
The rest of what you say is generally true, although a larger target *would* help. The advantage of a larger target is that, while you still have to zero your horizontal velocity, you don't have to zero it anywhere terribly precise. You can pick an optimal set of thrusts that results in the correct orientation and velocities (horizontal and vertical) without worrying overmuch *where* that series of thrusts has you touching down. Both attempts so far clearly demonstrate the ability to do an excellent good job of targeting a (relatively) tiny barge, but currently, if the rocket would come down even 100' (30m) to one side of its target spot, it needs to induce a horizontal momentum (which requires leaving a vertical attitude as well, it can't just translate sideways) and then null that momentum at the right moment (and fix its attitude). That's hard.
To clarify for the person who keeps misunderstanding my posts: they should, of course, plan for the barge-level of landing precision. They should aim for a precision of inches, and within a year, they may get it... 90% of the time. Stuff goes wrong, though, and (especially early in the testing of such a system) it behooves them to use a larger landing area so that there's some margin for error. I'd say their land attempt (possibly next CRS launch, in a couple months) has a very good chance of being their first success.