I don't see why smaller societies should not be able to thrive. My grandparents said once that back in the day you could identify what rural village someone was from by their accent. Meaning populations inside of villages changed very little. And most of these villages did just fine with populations as low as 200.

Maybe that's why they seperate the ship into 5 indendent areas, each 480 people. So that at least one culture will survive for 400 years.

They all existed within the greater (regional, national) social context. There still was freedom of movement even if at much greater cost. There were avenues for delinquents and outcasts to seek fortunes in the cities or even overseas. There was no overarching purpose imposed on their life other than the religion.

This is not to say that generation ship societies are doomed to fail but chances are decent.

The real question is what stops them from declaring independence and cutting ties with Earth. Especially after generations of people? They'd need strong ... propaganda, for lack of a better word.