Hello Jordan;
AWS D1.1 list the min and max dimensions of the transducers required for the both straight and the angle beam. As long as you are using a transducer that is within the acceptable range, you are good to go. If not, you can deviate only with the approval of the Engineer or Owner. You would have to develop calibration standards that would allow you to size different artificial defects.
The rating system used is based on the reflected signal produced by a transducer of a certain area. If the area is too small or too big, the energy of the reflected signal can be influenced significantly. Thus the rating system used to determine the size of the reflector is no longer valid. Thus the test is invalid.
Simply producing a signal of a certain amplitude (reference) from the 1/16 inch side drilled hole is not sufficient to meet AWS' requirements.
Al
As Al mentioned, for acceptance or rejection, you need to use the allowed sizes and frequencies. However, many inspectors will use transducers outside the AWS ranges for evaluation of an indication. For example I might select a 1/4" X 5Mhz X 70° transducer to afford me a better look at an indication, like to verify that it is continuous or broken, or verify it's length, or even verify it's location when a backing bar is in play. Likewise, sometimes I'll use a 1/8 X 5MHz SB probe to verify depth(s) or scan the shadow of an indication I located with an angle beam probe.