Xylem's main job is to transport water, and therefore the inorganic nutrients in the water. Now, to answer your question, we need to know how water is transported.
Water is transported due to both cohesion, adhesion, and surface tension. Water is known for forming hydrogen bonds, and this is known as cohesion. When it forms hydrogen bonds with other molecules, this is called adhesion. In the xylem, some of the water molecules are evaporating, but pulls the water molecules below back up. The adhesive forces also do a similar job of pushing the water up.
Now, if the xylem was smaller in diameter, then the surface the water is exposed to increases. This means the adhesive forces are stronger. Therefore, the water is transported a higher distance. This is important for really tall plants.
Now to answer your second part, the arteries analogy is so wrong. This has nothing to do with how fast the waters goes up, but the height at which is reaches. Also, the human blood vessels depend on pressure and pumping (the heart's job).