Your hardware sets the limits

Large hosted models can be spread across many expensive chips.

The mountain temple has room for an enormous Oracle and the machinery needed to serve her. Elara's hut does not.

A personal computer has less memory and less computing power. Local models are often smaller, compressed, or slower so they can fit.

Smaller does not mean useless. It means the machine has a tighter limit on how much model it can hold and how quickly it can run.

The size of the room limits the size of the Oracle.