So it's not a question of if they would evolve, but how. Would they remain small without the massive vacancy left open in the upper niches? Would their respiratory system evolve like OTL, allowing them to reach massive sizes and take advantage of the growing oxygen percentage in the atmosphere?---
Or would the atmosphere change at all? If you look at coal records, after the Permian Extinction, there is a 10million year gap in coal producing plants! With different flora, would the atmosphere be different? I think so. "Dinosaurs" could very well end up like mammals, and Synapsids being the Dinosaurs, many of whom are wiped out when the K-T event happens and 65% of all life is wiped out by the asteroid. Would Mammals then be (presumably) be the birds in this relationship? Not literally, mammals might not be aerial, but you get my drift.
I still think that Dinosaurs would still evolve roughly as OTL: as bipedal birdlike reptiles. The reason for this is could mainly be due to the fact that it was the most evolutianary suitable for the period. Two legs means faster, more agile, height advantage and also can get rid of heat faster then low lying synapsids.Its unlikely that archosaurs'or silesaurs would go back from whatt they had already evolved into-bipedal.
However, you do hit it on the head when you righly suggest that they would ( largly) remain small since the big planteatng and and large carnavores will not develop. Dinosaurs may well remain small therapods eating of fish, insects, small reptiles and maybe later on developing into pack hunters. Later, many could develp flight more effectivly then OTL, with a wider range of gliding retiles like
archeopteryx. This may have a knock on effect of no birds and less ptersaurs-if they even evolve. Flowers and other blooming plants may not evolve as they did in the early creatacious OTL since there's nothing to eat them. And this means no Bees or butterflies E.CT. you get the general idea. Its a knock on effect on a MASSIVE scale.
And of course, if the dominent reptiles the synapsids were to die out 65 million BC ( if they dont die out in the triassic or jurrasic extinctions that is) then ironicly enough it would be thoes small dinosaurs who benifit most.......
This all begs the question of what happens to mammals with this knock on effect? I dont know. Possibly they get bigger and become herds of lumbering shrub eaters.