Midna isn't THAT small though. In literal terms, Kirby should be eight inches, but he looks more like three feet, so resizing Midna isn't a problem if she does need to be resized. She would probably levitate in the air like Mewtwo, and her imposing helmet gives her height as well. I would assume she would be no smaller than Lucas.
As for her true form being in there, I'm for it. Another character combination like Zelda and Samus wouldn't hurt. If those who don't want her true form in there, nobody is forcing you to transform into the different form. Imp form would be small, nimble, and quick. True form would be hardy, graceful, and powerful, which is the exact opposite in how Zelda starts off a match.
A wolf Link and Midna combo isn't cutting it for me. It'd be a 'bad' weird to see Midna riding Link, fighting against human Link, plus it just makes Midna look like she must use Link as a crutch to do her bidding when she has enough potential herself.
Oh man, I can already see her entrance appearance. A twilight warp hole opens up in the air, and a bunch of black squares spinning together forming Midna with her arms crossed as she releases her little cryptic giggle.