The short answer - Horsepower is based on Torque and RPM. If you produce the same amount of torque at a higher RPM, you produce more horsepower. More HP is always good ;)

It isn't. Good towing performance usually comes at lower RPM. The big commercial trucks and heavy equipment almost always choose large displacement, low RPM deisel engines for best performance. The basic answer is essentially: the more fuel you burn per second, the more power you can get out of your engine. There are three typical ways to get more fuel per second into an engine: bigger displacement, higher pressure (turbo or supercharger) and higher RPM. Basically, if my engine sucks in one liter of fuel/air mixture per revolution and I want to (approximately) double my power output: I can run at twice the RPM; I can double the displacement at the same speed; or I can boost my intake pressure to 2 atmospheres. Or I could do some of each. You probably have to do significant engine redesign for any of these options. The reason that turbocharging and higher RPM are preferred for racing and aviation is that weight is a huge penalty in those applications. In big trucks, pumps, generators and earth-moving equipment the weight penalty for a BIG block and a BIG engine is a much smaller consideration than in sports cars and aircraft. There are a lot of variables that determine what will give the best "performance" in a given application. Sometimes the right answer is a longer piston stroke for better torque, sometimes it is a larger bore diameter, sometimes it is improved intake and exhaust components to move more air.

There are times when we wish that we could be better off running the steam engine rather than continueously improving the petrol engine. Now, for example is one of that time. Logical thinking might quick to assume that lower RPM usually translate to less fuel consumption. Part of it is true. With current automotive developments have opted to gained more horses out of screaming engine at plutonic RPM rates, we could reconsider the options. The automotive designer might reconsider the options to produce small engine with low RPM capabilities. Having longer stroke might help but the dimensions and design must be truly balance to obtain optimum engine flow. The top cylinder port design must be at the best calculative porpotionate to obtain maximum compression and flow. The biggest change might take form at the crank weight, shape and size. This is a must in order to preserve the torque but with small combustion bore and stroke, to improve or even match the RPM climb rate with the existing engine design is the real challenge. The other part of consideration is the gear ratios. The designer must conduct thorough calculations to obtain best results. The chosen gear ratios will influence the performance via RPM climb rate of such conceptual engine. Other than that or stick with the existing design applications until the time comes when we have consume all the petrol in the world.

it depends on what kind of performance you want. neither one is better than the other overall. it depends on what you want to use the motor for. if you have a high speed race car, you want a motor that performs best at high rpm's. if you have something like a rock crawling jeep, you want something that performs best at lower rpm's.