No idea about molecule size, but the reason for nitrogen is that it expands less than air when heated, so tire pressure doesn't change as much when driving hard on a track.
> As far as the lower moisture content, couldn't they pass the air through an air dryer before filling the tire if it was that much of an issue?
Yes, this point is some dealership BS. Pretty much every auto shop will have a dedicated air line for filling tires, if not the whole system with an air dryer.