If I made a morph of Roxie to look like a small child, say about P7 Kate's age, and scaled Roxie down to Kate's size, when I inject that morph into a full size Roxie, would the Roxie just morph to look like a chil but full sized, or will the morph also scale her down?

If you scale the figure and then use a morph made from the figure at full scale, that's not communicating any "scaling" to the figure. The mesh will move exactly the vector value that's in the morphed geometry. So, if that morphed geometry isn't scaled down before it's applied to figure, the figure's scale will remain the same. ie: Scale down the figure to 1%, import a moph object and apply it and, whala, the figure's scale won't change one bit, since the geometry changes in the morph didn't also change in scale, only by vector relative to the original object.
Poser has gotten better with scaling options and smoothing that works better with scaling. It is inadvisable to actually produce a change in pure scale by just scaling down a morph object and applying that as a morph. Rather, it's best that if you have plain scaling in a figure (Overall and/or just along the main axis of a limb/bodypart, you apply those scaling values to the figure with a Pose. Poser will generally do a fair job of it, as long as the scaling isn't beyond either the rigging or the smoothing morphs to handle.

IMO, it is inadvisable to use scaling along minor axes of a limb/bodypart. So, for instance, it is inadvisable to rely on the use of scaling to make "thin" arms along the y-axis value. That's "bad." You can shrink them a bit, along the x-axis, and Poser won't balk too much. But, anything along any other rotation axis should be done with a morph. The same goes for the trunk, too - Scaling it along the y-axis won't upset Poser too much, but along any other axis and you'll start seeing problems. That's because these bodyparts will deform most around those minor axes. ie: An arm goes up and down more than back and forth and a trunk deforms more left-to-right and back-and-forth rather than when it twists.

Ideally, what you'd want to do with a radically scaled figure, that has geometry scaled differently than the original, is to customize the rigging. There a lot of rigging in V4 with JCMs, @$%^@ magnets, etc... :) But, you're also in luck - Weightmapping is now supported. This can, but not always, make radical morphs a bit more easy to deal with in order to get them working well with a weightmapped V4's rigging. It's really up to you and how much work you want to put into it. (And, how many items you want to force through the weightmap conversion process. :) )

Failing to custom rig a radically scaled figure can be evidenced by the joint rotation deformations along the main/common axis of rotation in the V4(or any human) figure. So, for instance, if you have a V4 with a chest that is 30% wider than normal, you'll see the worst deformations, without equally radical adjustments to the rigging and other nifty things in V4, along the z axis rotation. In some cases, especially where you've shrunk geometry, the JCMs/other dependent morphs for that region will be greatly enhanced, since the geometry is now tighter and those change in vector values are still the same. (Tighter geometry always amplifies morph vectors in appearance.) When that happens, you can sometimes reduce this problem by choosing the Figure's "Parameter" menu, then reducing the value for the Deformer Strength. (This might not adjust all deformers, though. I forget how it affects everything. Some may need tweaking and good luck with that with V4. Great figure/product, but a lot more complex than it looks!)

PS - The "Figure Height" submenu under "Figure" menu is basically completely worthless for anything other than Smith Micro figures. And, even then, it's almost totally worthless, IMO... It shouldn't even be in Poser. But, since it's legacy stuff and Poser loves the heck out of being legacy-friendly, I guess they decided to keep it in there. IMO, you should never, ever, use it for anything other than just staring at and wondering why the heck it's there... :)