In what regard is it incorrect that a single, larger entity that is at least notionally committed to avoiding the existence of any specific type of content on their platform is more likely to successfully avoid the existence of that type of content on their platform than smaller entities with less resources?

Now consider that some of those smaller entities might not be even notionally interested in avoiding the existence of that specific type of content on their platform, and are small enough for regulators to be unaware of its existence?

What your opponent is saying is, "there are mutually exclusive A and B". A being widespread CSAM and B being somebody need to look at CSAM to remove it.

Can you elaborate on what exactly is wrong there? Do you see the third alternative C and it's not the "whole choice"? Or are you saying A or B do not exist and therefore there's no choice? Please name C, or tell us why A or B don't exist (or aren't acceptable), or explain your view that doesn't fit into these options.