If the village is still small then it is is. If it's bigger then it's was. I prefer saying more like, "The village is small and isolated." You could also say, "The village is small with few inhabitants."
Outside of technical curiosity for the topic, I would avoid that kind of writing as I'm more of a to-the-point reader who hates bloat that pads lines. So I would value add the sentence and make the description implicit: "The small village was ..." "The small village had "..." A line-by-line or play-by-play style should stick with sports radio or at key moments of a taught thriller. "I opened the door. A blah blah blah-ish man stood..." It might evade the point in question, but it sounds better to me and increases the flow, imo. Unless there's a specific style that builds that pace, but I don't think writers should be allowed mutilate language purposely in order to play it as some kind of "artistic design". Post-ironic claims by the writer as "how it was intended" shouldn't be an excuse to cover up lazy writing, though book sales can largely disagree on that principle.
Why not just saying "It was a small village"? To be honest, I don't see anything wrong with "The village was small" either. Doubt that his readers would wonder about the current state (or size) of the village when they read "The village was small" within the context of the flashback. BTW, this is one of the best threads I've seen in the entire CF, everyone deliberating the issue with less ego and more care and focus just to help the OP. Much respect and Happy New Year, CF!
