I don't understand, how does increasing hull reduce the effectiveness of every other module? I could understand it reducing jump range through added weight, but every module? B-rated stuff seems like the pick if one is going for survivability in combat over jump range.
It absolutely does not affect the effectiveness of
every module.
Your thrusters are affected by the total mass (the combined mass of your hull + armour + core modules + optional modules + hardpoints + utilities) of your ship. Shield effectiveness, on the other hand, is only affected by the type of the ship you are using a certain shield generator on.
In other words, the exact same shield generator + shield booster setup will give you a different number of hitpoints on a Vulture and on a FDL, for example.
But it does not matter if you use it on a heavy FDL (heavy duty military hull and a lot of B-rated modules) or on a light one (lightweight alloy, D-rated modules), the number of shield hitpoints will be the same, as long as you are using the same combo of shield generator and shield boosters.