I really think the category thing is important so yes I have done categories, and would do even in a big house. I realise this is hypothetical because I live in a tiny house, though!
But this is my reasoning/pros and cons.
When you do one category, you know that category is done. That means you don't have to do the entire house in one go. I did my tops months ago. Trousers and dresses a few days later. Recently I did underwear. It didn't matter that I'd left it so long between categories because each category is discrete. When you do one area at a time, the problem is items move between areas. That means that you lose track of what you've sorted and what you haven't. When I know that I've done ALL of my tops, I don't have to think about tops again. In fact, when I go to bring a new top into the house, I think about it more carefully.
Yes, it takes longer every time to go through the entire house, checking under things, in little nooks and crannies etc to find stray items, for clothes I also made sure none of that category was in the washing machine (which did mean sorting some wet or dirty items in with the clean ones, I just piled them separately.), in the loft etc for other items like books. However, to have every thing out of your category in front of you allows you to firstly, see what you actually have and secondly, choose and prioritise much better. When you can see you have two yellow t-shirts, you remember "I love this colour on me, oh, but this one has a really annoying seam." If you hadn't had both of them there, you might have overlooked the seam in favour of the colour. That's a random example, but hopefully you get what I mean.
I would not do, for example, everybody's tops at once. One person's tops. Further dividing into subcategories is a good idea too, I like that, if you're short on time. (Though IME it's worth allowing the time to 1. find everything (EVERYTHING.) 2. discard 3. put everything surviving away, even if it's months until you have the opportunity to do this.)
In my experience, items and even areas stay less cluttered and more organised too. Don't get me wrong; I still chuck my clothes on the floor. But my drawer only has tops in which I like, they are ordered, when they go in there they (mostly!) get folded, and I can see immediately when I've been lazy and dumped something in there like one of DS' tops. When you "kondo" a more general area like a bedroom, stuff from other parts of the house end up in there which haven't been kondoed and the clutter and unsortedness creeps back in again. And then when you do the area those things are supposed to live in, you miss them. And redo items which have been migrated back from the bedroom.
Lastly it's inefficient - you end up with lots of small storages of different items spread around the house rather than one big place where all of the pens (or whatever) live. That means it's less obvious where to put something back and again things spread.
There is a bit in the book near the beginning where she explains why other tidying methods don't work long term and this is one of the things which is explained. I think she calls it "Why not clean out a closet?" or something. Really worth re-reading if you have the book.