How written in stone are the rules of rug size? I have a small, punchy kilim rug that looks fantastic tucked under my coffee table. It's too small to reach the legs of my sofa (or even sit on), but I love the hit of colour it brings to the room. Can it stay?
Rules on size are bendable but not breakable. I get the hit of colour and that the rug looks fantastic. But if it just fits under the coffee table, I hope that the table at least has a glass top for viewing.
Leave it, but anchor it with a larger carpet, such as a sisal, underneath, thereby mitigating the "flood pants" effect. In fact, a layering of carpets can make a room appear larger. I prefer a border of wood, then a large linen carpet with an Aubusson area rug on top. I try to choose an area rug that is sizable so that it doesn't get lost in the room. It sounds like your rug could just as easily be a wall hanging. Remember that art is in the eye, not the feet, of the beholder.