I don’t have a cite for it offhand, but yes, I believe that predatory mammal species like cats and dogs are generally considered more “intelligent” than mammal prey species like deer and cows. But I don’t know how you want to quantify “intelligence”. If you mean being trained to run mazes, rats and mice are probably the best at that, and rats at least are both prey and predator (sometimes).
Predators, generally speaking, have to figure out strategies for catching their supper. They have to remember what worked the last time, and modify what didn’t work. All the prey has to do is run away, and they’re mostly hard-wired for that. They see something out of the corner of their eyes, or they hear a funny noise and ding! they’re off and running.
Now, if you’re talking about birds, it’s different. Parrots are generally considered more “intelligent” than hawks, because they can be trained to do more things. However, hawks are considered more “intelligent” than robins, because you can train a hawk to come back to your fist more reliably than you can a robin. But does this denote “intelligence” on the part of the hawk?
As far as evidence that dogs are more “intelligent” than cows, I can’t do any better than repeat what WillGolf said. You can’t train cows to herd dogs. And bear in mind, that for every animal species you can name, you’re going to have some hobbyist jump up out of his seat and holler, “Gerbils are SO more intelligent than hamsters!” and then give you endless anecdotes about how smart HIS gerbils are.
So I guess I’m saying your OP question is kind of moot. How do you want to quantify “intelligence”?
As for the puppy mill thing, I don’t think you’ll find very many people who will stand up and say, “Puppy mills are the wave of the future!” As for comparing puppies in cages with, say, veal calves in cages, or farrowing sows in a confinement facility, or even battery hens in tiny little cages, I personally disapprove of all of it. If you’re going to raise livestock, it’s humane to at least give them room to walk around.
And yes, I think that a dog raised in a cage is going to be more miserable than a veal calf in a cage, dogs being social creatures like humans, who need that social interaction to be truly content. But as for the puppies “realizing their situation”, I don’t think so. That’s kind of a 101 Dalmatians take on the situation, and it would assume that the puppies would have something to compare their experience to, which they wouldn’t. If all they know is the cage, then they wouldn’t be able to sit there and think, “I wish I were out of this cage”.