It does affect the odds of being hit
Because the target does not know your exact location if your illusory size changes. No, you won't gain any bonus to AC (though that is a good house rule), but a creature that fails their will saving throw cannot tell whether the illusion is real or not, so they treat it as real.
Veil is a glamer effect, very much like Invisibility:
Glamer: A glamer spell changes a subject’s sensory qualities, making it look, feel, taste, smell, or sound like something else, or even seem to disappear.
And these are exactly all sensory qualities affected by Veil (except for taste and sound):
The subjects look, feel, and smell just like the creatures the spell makes them resemble.
So if you create a veil of a dragon, you will look larger, will feel like a dragon ( the texture of skin, the sharpness of teeth, the temperature of your breath, etc), and will smell like a dragon. But you will not taste like one, nor sound like one (you might need to cast Ghost Sound for that).
On Invisibility, the effect is a visual glamer, it makes it appear as if you were not there, but in reality you are there. The reality is not changed by a glamer, only the perception of others about it.
The Ultimate Intrigue brings several clarifications about illusions (page 158), especially on the difference between the subschools of illusion:
Phantasms directly assail a creature’s mind, so the creature automatically and immediately receives a saving throw to disbelieve a phantasm. Figments and glamers, however, have the more difficult-to-adjudicate rule that creatures receive a saving throw to disbelieve only if they “interact” with the illusion.
For a glamer, interacting generally works the same as for a figment, except that the interaction must be limited to something the glamer affects. For instance, grabbing a creature’s ear would be an interaction for a human using disguise self to appear as an elf, but not for someone using a glamer to change his hair color. Similarly, visually studying someone would not grant a save against a glamer that purely changed her voice.
Those who interact with the subjects can attempt Will disbelief saves to see through the glamer, but Spell Resistance doesn’t help.
Personally, what I do those situations when GM'ing is to grab the statblock of that creature and use it as written, because those who believe the creature is real should treat it as real, including AC, saving throws, hit points, attack bonuses and damage dice. Unless, of course, a situation shows up where one of the non-illusory senses would allow a second will saving throw, like the half-orc biting the tail of our illusionary dragon ("I know the taste of dragons, and this is no dragon!").
Now, about the chances of being hit. If you create an illusory glamer of a larger-sized creature, the illusion will fill spaces (like 20 feet) that are not actually yours (say 5 feet). What happens when an enemy attacks one of those squares?
Well, we have to first ask: "They have saved against the illusion?"
- Yes: Then they realize they attacked something illusory and a translucent image of a dragon appears, releaving the target of our Veil.
- No: Then they believe they are fighting against a real creature, and if their attack did hit the dragon's AC, they believe they hit and probably damaged this dragon.
PS: If you open the bestiary on the dragon's page during gameplay, your players will surely believe the dragon is real, or you wouldn't be looking up the creature.
If the enemy attacked a square where they believe there is a dragon, but found your character (hidden through the veil), then it should be treated no different than the full concealment granted by Invisibility. Afterall, they did not know you were there and attacked the space where your character is located, even if they believe they were attacking a dragon. And this certainly should allow a second saving throw, as the feel of whatever was hit is different from one creature (a dragon's leg) to another (a human in a dress), but I can tell you this likely will depend on your GM.
If the caster casts the veil of a smaller creature, then all those who do not interact or fail their saving throws should believe they are looking at a smaller creature, be it an ant or a dog. Those who interact will be allowed saves if the glamer does not affect one of those senses like a dog talking instead of barking. If the veil creates the illusion of an ant, well, you just used up a 6th level slot to duplicate the effects of a 2nd level spell. By that level, the caster already has access to several spells that creature semi-real illusions.
As such, the veil of an ant would grant the target 50% concealment, if the attacker actually knows which square to attack (requiring Perception checks), just like if the target was invisible.