The trainer does not care what gear you are using.
The difference you are feeling is high inertia vs low intertia.
High inertia - Big chainring (e.g., 53x11) - Higher trainer flywheel speed
Low inertia - Small chainring (e.g., 36-28) - Lower trainer flywheel speed
200W in either gear is still 200W. However, they will feel different. Give it a try, especially at higher wattages at or near threshold, you will feel the difference.
As for the smoother power curve, ERG mode adjustments are smaller and quicker since the flywheel speed is lower when using lower gearing (e.g., 36x15)
I train almost always in ERG mode w/a low gearing. The primary reason is that because the flywheel speed is slower, the trainer is quieter no matter which trainer you are using. Secondly, I find the workouts harder than using the big ring, which is contrary to most. YMMV!
You might find @GPLama explanation to be easier to understand 
