The first sentence uses「は」to introduce a new topic, with the added emphasis that it concerns the speaker's home town specifically. As you pointed out yourself, the construction 「小さく、」is a different way to write 「小さくて、」which helps the listener prepare for more information related to 「私の町」.
For the second part of the sentence, the topic becomes 「（私の町に）住んでいる人」. However, the particle「は」is used over「が」because it concerns information that's already shared between the speaker and the listener (i.e. information about the speaker's town). In this answer I try to explain the nuance between 「は」and「が」when they're used after the subject of a sentence.
Another possibly confusing aspect about this sentence could be the fact that 「人」which is generally taught to mean "person" or "people," suddenly refers to a population. In English, you might expect a more explicit wording such as "the number of people" as opposed to just "people."
The thing is that「住んでいる人」does indeed refer to people who live in my town, but that the second 「人」in「３０万人」is the counter for people, something that doesn't really exist in English. So what you would express as "the number of people" in English, is actually engrained in the usage of a counter in Japanese.