Literally Dorado means anything covered with gold or at least that has the color of gold, so when you say El Dorado you're implying by the pronoun EL, that the place has/it's covered of gold.
MLT if you like El Dorado and want to say it's a little place/town you could go with El Pequeño Dorado.
skfolc, you're not making up anything, doradito its a word, 'ito' does mean 'little' although as 'tiny'.
For example pencil = lapiz, if you say 'Could you lend me you're pencil?=Puedes prestarme tu lapiz?', even if the pencil it's half used (small)and you'd like to specify it's size you still say pencil. But if the pencil it's used almost all of it(it's particulary small), in this case if you wanted to specify it'll be 'Could you lend me you're small pencil?=Puedes prestarme tu lapicito?'. If you said 'lapicito' for a half pencil it's not accurate because the pencil is not *that* small.
Hope I didn't confuse either of you with my attempt of an explanation
Carolyn
