I had always wondered how small you could make something in Freelancer, the Starflier with both it's wings broken off being the smallest ship I knew...
So yeah, reduce in ship size would also mean changes to: ship movement speed, weapon range, Probably Trade Lane size...
Speed might be not too much an issue, reduced with the ship size, distances would indeed become longer, perhaps keeping cruise speed unchanged but add delay to charge it up?
should then work out the same time to get across a system, cruise would be relatively faster, but up the range on CD and it would work...
There might arise issues with hit-boxes being too small and hard-points being too close together...
Still, it's funny seeing how the Ross Planetoid can fit easily inside most 5k transports... or several times into the Barge:)