Ok, here is my opinion based on what you have posted.
If your target market is "customers could be hiskul students and wanna be rockstars lang" (in your own words), then small room is ok. Those kids dont mind cramping into the small space of a studio just to rock. This way also, it avoids those unecessary saling pusa or those who makes the studio rehersal a gig by inviting all their friends to watch them rock.
Did you do a market study on this. Something like having actual figures/facts on the demand for a rehersal studio on your place. Normally in a business they would start small, having one studio room muna, then later if the demand is big, expand into something bigger. You might have a second studio room that is always vacant.
If your target market is for showbands, pro bands, or those of the likes, then a bigger room is the thing.
If you want to set up something for recording, that is totally a different story. Here you are setting up an isolation booth and a control room... totally different from a rehersal studio.
If I were in your shoes, I would go for one studio muna. however big it is. Try to feel the water if there is a continuous demand for a second studio is there then you can set up the second studio later on. However take in mind that in a business there is always a first time surge. Baka sa una lang madaming cliente but later on kumonte.
Im just trying not to be too technical here but rather be practical. With a small seed and pot of soil you can harvest plentyful in time develop a plantation . But with a pack of seed and a pot of soil you will need to feed too many and spend too much for what you wanted to earn. I hope you get my drift here. Minsan din kasi nakakalimutan natin ang purpose natin na negosyo to. Mas malakas ang urge na magset up ng magandang studio lalu na kung passion din natin yan. Im guilty also with that.
Hope this helps.