Rod lenght does have more affect on the motor than just friction- I just don't know how much of it actually transfers to HP. The big 3 reasons for rod length I see are:
1-long rod = more piston dwell at TDC (whatever that does...)
2-long rod = lower piston accelleration (lessens chance of ripping the pin boss out)
2-short rod = higher piston accelleration (could help draw intake charge in at lower rpm)
3-short rod = narrower motor/shorter deck block (really only an issue in vw streetcars)
You are right, but it may be a give and take deal, you may gain something but its lost in something else. Not considering the wear and lifespan of the engine.