If by "at least 4 classes" you mean 3 classes then you would be correct. There is AA, A and B and has been that way since the mid-80's.
You're right that there are not many teams in AA because there just aren't that many larger cities. But those schools are huge compared to the other classes. The AA tournament has never been very popular because it's pretty easy to make the state tournament. In Class B you still have to win about 5 games to make the state tournament. Now, as smaller schools fold up and there are more and more co-ops, even that is becoming easier unfortunately. The B tourney is still pretty popular. A bar in Aberdeen just got busted for running numbers on the Class B tournament.
I was mistaken. It seemed like more. I went to the B tournament at Northern one year. It was OK. Yes, it's mainly the AA tournaments (in all sports) that are a joke. But I guess there really isn't anything they can do about it. It's the same way in Nebraska, ND, etc.