I've always been taught that breaking things down as small as possible is good - easier to estimate, easier to understand, easier to track.
You don't want to give a developer a week long task - that turns into two weeks, for instance. There just isn't the visibility.
I'd agree, there's a huge issue of none of the work feeling important, and an issue of Developers having no real power in the process (other than to unilaterally dictate how long we thought things would cost, strangely enough).
But is it a result of subdividing tasks too small? I'm not sure; it's an interesting concept to explore.