I have made a Short Aiko, I didn't create any new morphs, just resized her using the x,y,z dials on almost all the body parts.

http://www.renderosity.com/mod/forumpro/showthread.php?thread_id=2713258

I have Wardrobe Wizard, Poser Tool Box and OBJ2CR2. I have tested her in Wardrobe Wizard and it does a great job of refitting clothes for her, Aiko's clothes also fit her (with a few adjustments on the clothing).

I want to put her in Freestuff, but, I have a couple problems, which I hope you can help me with.

1. I have been able to save her as a pose, then load the original Aiko and apply the Short pose, everything works, and she stays that size through any other pose...Is distributing her as a pose a proper way of doing it.
   I know I cant distribute the Short Aiko figure I have made.

2. When I apply the short pose to the original Aiko. Aiko turns short and jumps off of the ground, I have to Drop Her to Floor, Then when I apply any other pose the the short Aiko, she jumps off of the ground again.
   Her jumping off the ground happens all the time, whether I load the short Aiko from the Figures library, or apply the short Aiko pose to the Original Aiko. And when I go to edit/restore, she restores to the original Aiko.

TIA

about 2
dropping to the floor is moving either the hip in y or the body in y.  forgot which one.  but maybe try using the other one, not drop to floor but manually place it on the floor.

all the poses are gonna do that though, happens with all the resized characters.  you can find the difference in the y maybe and add it to each pose in the pz3 file and save a new set i guess. 

ah here's an idea.  save just the y element in a pose (without any other changes to original aiko) file and use the script ockham created to blend two animations, and just add the two together everytime.  i guess you would save the y pose as a bvh motion file. 

Place little person Aiko on the foor and "zero pose" her. That might fix things.

Have a look at this thread:
http://www.renderosity.com/mod/forumpro/showthread.php?thread_id=2699144&page=1

It's kind of a paintul process, and several possible solutions are discussed.
*link goes to nudity

Quote - 2) When I apply the short pose to the original Aiko. Aiko turns short and jumps off of the ground, I have to Drop Her to Floor, Then when I apply any other pose the the short Aiko, she jumps off of the ground again.
Her jumping off the ground happens all the time, whether I load the short Aiko from the Figures library, or apply the short Aiko pose to the Original Aiko. And when I go to edit/restore, she restores to the original Aiko.

This is happening because the legs have been shortened, not exactly jumping the whole figure into the air but basically "pulling the feet off the ground", since the origin of the figure is the hip.  Applying a pose generally will move the hip to a hard set of coordinates that I don't see how you could transparently adjust to the new hip centre point.  While you could adjust the origin of the hip in the joint editor (I think) it seems to me the distances that a given pose will move the hip will never correctly match what you've adjusted the hip's origin to.

I shorten legs all the time and just use Y-Trans to get them back onto the ground. I'm sure others wouldn't mind.

If you change the Origin, does that mess up poses from the library? Of course, most have to be tweaked due to the difference in lengths

1. Yes, distributing as a pose file is the correct way to share.