I went and tried it with a full ten-dwarf squad, with constant 10 minimum training requirement, and it worked normally. I went with a marksdwarf squad equipped with hammers (to enable sparring) and they took their sweet time getting there (sparring _is_ skill-dependant, and they wouldn't start before they were at least in the novice/adequate range, which had to be gained through individual drills), but after eight months of drills and demonstrations, sparring has begun. I don't know what's been going on in your fort, maybe skills had to be built up before sparring could start. Setting the training minimum below the number of squad members is _not_ required to get proper training (in .40.x - smaller or lower-requirement squads _did_ help in .34.11, but no more); dwarfs will _not_ wait for a sleeping/eating/drinking dwarf with their training (something like this rarely happened in .34.11, but no more).
Fiddling with the settings might arguably have helped getting a spar-readier squad composition, but i have my doubts.
Smallish squads with even skills and at least moderate skills to begin with usually start sparring quickly and level up very fast - with the small differences, there's hardly the need felt to even out skills through demonstrations. I'd still just make a four- or five-dwarf squad and assign the full number per month instead of setting a ten-dwarf squad to partial training, because as i said, a reduced minimum primarily means fewer dwarfs actually get mobilised per month, and i fail to see the point in putting them into a training squad when i then don't order them to engage in on-duty training; off-duty melee training isn't very useful.