Sounds like someone is in need of a good old fashioned ruck march.
Roger that.
The short answer as to why we use small caliber 5.56x45 is that round for round, it is considerably lighter than the full strength, larger caliber 7.62x51 that it replaced. Not just the round, either -- the rifle was quite a bit lighter as well. That means that the individual is able to carry more rounds for a given weight, and with a lighter weapon as well. Not only that, but the recoil is quite a bit less, meaning that semi-auto follow up shots are faster and full auto fire is quite a bit more controllable. In a lighter weight rifle. Infantrymen appreciate light weight. Take my word on this.
Hollow points? We never used hollow point 5.56 ammo as a combat round. Or soft points, either. FMJs only. The initial loading used a high velocity, relatively light bullet that was barely stable and thus was prone to yawing on impact. Not only that, but at shorter ranges, after it yawed it was liable to fracture at the cannelure and both of the resulting halves would expand, creating massive tissue damage. Note that this is not the only military combat round in the world (and not the first, either) that did that. Later on, to improve longer range performance, the rifling twist rate was increased as well as the bullet length and weight, both of which decreased the liability of that yaw/fracture/expansion effect. Even so, it still gets the job done. FWIW, back when I was "wearing green" in the mid to late '70s, we were armed with the "old type" lighter bullets in our M16A1s. Our only qualms with the platform was feeding reliability, not with terminal effectiveness. Even with the lighter bullets, we could consistently hit our targets at 400 meters*, and that was good enough.
Let's put it this way: Back in the day, the other side tried to make a stink about the yaw/fracture/expansion that the 5.56 was liable to do, claiming that it was a war crime to use such ammo (never mind that we weren't signatories to the Hague convention, and still aren't -- we act(ed) as if we were, and the system was actually compliant anyway). Yeah, it was a wicked little round, no doubt about it. Nobody on our side complained about the terminal effects, unlike the other lightweight option fielded not so long before that time, the M1 Carbine. And even those complaints were overblown as long as you respected its limitations. The accusations against the 5.56 lasted right up to the point to where the other side developed their own analogue of it. And they did so not only because we had done so, but they recognized the benefits of the platform. The enemy wouldn't have developed and deployed their own version of it if they weren't convinced it was a good idea, they weren't stupid. FWIW, our version wasn't explicitly designed to yaw, it just turned out to do that pretty regularly. Theirs was. I'll give them this, it wasn't the first modern military round explicitly designed to yaw.
Why not go to the 6.5, 6.8 or some other larger caliber round? I ask, what would you gain from that? Higher weight per round? That is a negative on the battlefield, it adversely limits the infantryman's standard load. Heavier ammo means fewer rounds, or less other gear. Better terminal results? Better than what? At least with rifle length arms (M16s), the 5.56 gets the job done. Carbine length (M4s) at longer ranges isn't quite as effective but it is still good enough. Keep in mind that the carbine length weapons aren't meant to be main battle rifles in open country -- close order battle or second line troops, neither of which are all that limited by the lessened long range effectiveness. So again -- what does the heavier round do for you, the infrantryman?
I think that the argument against the 5.56 boils down to "Good enough is the enemy of excellence". While that is, at the cutting edge, true; that itself is a fallacy when it comes to larger scale combat. When you are talking about the cutting edge, for instance special ops, then an argument can be made for the 6.5 and 6.8 since you have a higher trained, more capable soldier who can be expected to handle the increased weight. But for more typical, main battle line troops, the other side of the equation takes precedence. The excellent is the enemy of good enough. And since we, the taxpayers, are paying for it -- I say that for the bulk of the troops, we need to be looking at what is good enough to get the job done as opposed to what the minority of special ops troops would actually be able to make use of.
*Note that at longer (let's say, 200+ meter) ranges, from an infantryman's standpoint, just hitting the target and creating a casualty is good enough. At least that was the case given the situation in the '70s, where we were facing Communist forces, not suicidal Islamists. Quick kill/disable effects were important at short ranges, and the 5.56 delivered. Quick kill/disable effects are less important at longer ranges -- creating casualties that took the enemy out of the battle was good enough, and again the 5.56 delivered.