Recently I read a ICMA document discussing sustainability in rural areas.
One of the proposals was for higher density in downtown core areas of these smaller areas. In theory, I think this would pan out as more multifamily apartments in the core area, with little to no buffer in terms of residential transition before you get to the agricultural zoned areas.
I think this idea would work. For most small towns I think you still have a grid-like layout in the town core with residential development. I think in practice you can concentrate future residential development with the grid which is typical smaller lots and modest single story houses, and in multifamily. What you're getting rid of is what most would consider your buffer land in-between the town and rural areas. What you're getting rid of is the culdesac garden home development, and estate lots, thereby allowing more land for agricultural zoning.