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That's where frontier pulls ahead for sure, at least on the big frontier models - though I haven't formalized those findings because...time. Necessary disclaimer, forge isn't concerned, technically, with model quality, just execution of tool calls. Now for the actual answer... What I found to be the limiting factor with small models in the 14B range was "effective attention". Beyond a certain point, still well within…
The tool-call history collapse is a problem I'd pay real money to have solved cleanly. My crude manual version: keep the function calls but drop or summarize the responses for anything older than ~15 turns. Most of the "what was I doing" signal lives in the calls, not the outputs. Letting the model itself mark "I'm done with that thread, compress the responses" feels like the right abstraction, but I haven't seen anyone ship it well yet.
A per-model "compaction aggressiveness" knob in Forge could be interesting — the small-model effective-attention cliff might respond to earlier/heavier trimming.