Not necessarily. Cache quantity is a fine balance as larger caches take longer to search through, farther back ones take longer to get data from. Go back and take a look at the old articles between the Athlon II's and the Phenom II's the addition of the L3 cache wasnt a large performance factor, and given the fairly low performance of an Atom CPU i dont think giving it more memory to work with would help, precaching is pretty good these days so CPUs tend not to need more cache memory unless they are flipping between multiple threads, when they miss it tends to be a hard miss that goes all the way back into main memory so adding L3 cache would actually increase the performance penalty of a hard miss while not actually improving performance much.
It will also significantly increase die size, and heat output, the majority of the transistors in a CPU tend to be in the cache.
What if Intel took a dual core atom and replaced one of the cores with L3 cache and took the remaining core and lowered the clock speed and raised the bus speed while managing to keep the power consumption around the same.
In this age you really want two cores minimum on all things, even smart phones are moving onto dual core CPUs, if you take one of the cores of the atom you will take a large performance hit, and no matter how awesome the caching and bus speed are you wont be able to make up for losing that second core. A third and fourth core arent nearly as important the second core, and cache is there to be able to feed data hungry cores faster, if you have a smaller number of cores or slower cores your total data throughput is much slower so you simply dont need to store as much in your cache.
What if Intel mad a hybrid processor, replacing one of the atom's cores with a super efficient Celeron core, like the Celeron core can be fully disabled automatically or manually to improve battery life.