There is not only diameter there is also length.
Well... jokes aside...
1.) Diameter: larger diameter gives more room for explosives and more mass, giving more damage per hit.
2.) Charge: More explosive charge in the round gives bigger explosion but less impact since the round is lighter
3.) Wight: More wight gives more impact damage with the same speed and therefor better armor penetration and changes the flight characteristic.
4.) Form: Affects stability in flight and how it hits as well as range.
5.) Power: the ammount of charge that is used to fire the round gives the speed, when its more then the round will fly faster and longer range.
6.) Accuracy: diffrences between the rounds give you some spread in flying characteristics
7.) Rate of Fire of the Gun
8.) Total wight of cartridge (need to carry it around)
9.) Reliability against jams/missfire (not modeled in ah2 atm)
Some rounds are without explosives, using pure impact power. Some are with verry few explosives only delivering a sparc to light a fire. Some are mainly explosives delivering a blast on impact. Some are partly explosives delivering a "guided" blast for more damage.
Having said that in the game you can find non explosive rounds, which are usually smaller and are shot with a weapon that has a high rate of fire to deliver a lot of hits. Other type is explosives with worse flight characteristics and ROF but a more devasting hit.
Selection of rounds used in ah2 :
7.7mm, .30inch,.303 : small rounds without explosives, verry low damage per hit.
12.7mm : bigger rounds without explosives but better hitting than the above.
.50inch : best mg rounds, verry accurate and flying a long way but no explosion
20mm canons Russish, German, Japanise: Nice damage but not to good in accuracy and pretty slow bullets / lot of drop on long range, there is some diffrence between them but i dont know the real details.
hispano 20mm : Best Canon in game with good accuracy, range, fast fireing and a lot of damage. To me seems to be slightly better than the other countrys variants
30mm mk 108 german: A lot of damage but verry slow flying and awfull accuracy and range (prepair to shoot from less than 200yards)
Various bigger canons (34mm 40mm 37mm): A lot of damage but flying pretty slow, some of them (Specially the one from the IL2) are pretty accurate though at long range. These are the only aircraft fired rounds that do good damage to armored vehicles. On light Vehicles everything better than cal .50 does ok damage too if you hit.
This is only about plane guns... no tank, aa, ack mentioned here.
So as a conclusion: I think best guns are the hispano 20 mm and the cal .50 from planes, bigger is not necessarily better since with the big canons its hard to hit other planes.
Also the same diameter doesnt mean its equal, can still be that one is a lot better than the other.
ciao