Is the possibility of a cabin sized trolley bag being damaged when checked in high?

The size of the bag will make almost no difference in how the ground crew handles the bag. In fact, the bag will be ‘handled’ far more by airport’s baggage systems than actual humans.

Also, that it is cabin sized baggage makes little difference in ruggedness compared to larger baggage.

So, I think you’re quite over thinking this.

There is always some normal wear and tear to bags, just by the nature of being shoved and manually put in the ULD (Unit Load Device) – that’s what the giant boxes are called that are used to load luggage in the airplane’s cargo hold.

If it is small in size, it may be handled with less care as it is easy to pick up and place. You may want to ask for a fragile sticker to put on your bag at the counter. This instructs the loaders to use caution when moving the item.

To protect from external damage (like scuffs and scratches) consider having the item wrapped in plastic. It is a service offered at many airports these days; see Why would you wrap your luggage in plastic? for more on this topic.

In case of damage to the bag, here is what Lufthansa has to say:

In international and German domestic travel, the liability for damage,
destruction, loss or partial loss and for late delivery of baggage is
limited to a cumulative 1,131 Special Drawing Rights (SDR) per journey
and traveller. The SDR is the accounting unit of the International
Monetary Fund (IMF); 1,131 SDR currently corresponds to about €1,213
(please regard that this amount is subject to currency fluctuation and
may vary).

In general, you are responsible for your carry-on baggage and personal
belongings. The liability of airlines is regulated by law. We
definitely recommend that you take out a baggage insurance.

Lufthansa is not liable for breakable items in inappropriate
packaging, or normal wear and tear of overstuffed baggage such as
scratches, dents or damage.

To file a claim, you have to contact them at the facility:

If your baggage is lost or damaged, you should report this immediately
after your arrival to the Lufthansa baggage tracing desk or the local
Lufthansa representative at the airport.

You can report the damage or loss in writing subsequently within the
legally prescribed deadline, however evidence is then required and you
must prove that the damage or loss occurred during the carriage by
air.

I have checked in many a cabin sized piece of luggage and never noticed them being handled any different from bigger sized items.
At times I have chatted with the check-in staff when checking in a small case, they always reacted in a way that suggested that it is often done.
They do understand the need when you are having two pieces when only one is allowed for carry-on or when you mention carrying items not allowed in the cabin.

Looking out of the plane to the luggage carts on the tarmac you see all sizes of luggage mixed and when they put in the belly of the plane one by one, they are thrown no more gently nor more wildly than the bigger pieces of luggage.
On reclaiming luggage, the smaller items are, again, mixed with the bigger pieces and come the normal way.

So make sure your cabin allowed trolley is sturdy enough to handle normal luggage handling.

In all cases of luggage damage, get to the location within the luggage reclaim area where you are going to be helped when luggage is missing. Often the same location as where you collect out-sized luggage, but it can also be a different office off the main hall or a glass walled one in the hall.
Get forms filled out and photos taken (if only by yourself if they do not do it as well) and do not leave till you have been seen by staff.
Claiming online or by mail after you come home is not as likely to be successfull, as they can easily claim you have damaged the case since or have substituded a damaged case for the one you used.

But I have always taken sending in luggage as taking a risk. If it breaks in a predictable way, I replace it.
I might take action if a new strong trolley is broken or ripped open, but a small dent or even a broken off wheel on a used one, bad luck.

In some airports you can get your luggage plastic wrapped. In some you can get sturdy plastic bags that encase your whole luggage (mostly for backpacks but if you see them supplied you can ask.)
And you can of course buy a bigger case or bag and put it outside your cabin sized trolley.