Again, the beauty of android is you can do just about anything you want to do. You want widgets resized, use a different launcher; the play store is full of them free/paid.
But that's just it. I can and have tried a number of different launchers that let me resize widgets. I'm currently using Holo HD which lets me resize and also allows a 10X10 grid on the homescreen. All of that is great, but all that resizing lets me do is crop the widget, but the fonts stay at their fixed size, so the widget becomes pretty useless at smaller sizes.
According to the post I linked to, Android doesn't include any native way to scale widget content depending on the size of the widget, which is why you get all these widgets that have multiple sizes (1x1, 1x2, 2x2, etc...) instead of just having one widget that would dynamically rescale content (like what happens when you change the size of a window on your desktop). I'm not a developer, but this seems to be a limitation of Android that can't really be fixed just by a new launcher.
I did find another flashlight app in the f-droid repo that is icon size and works well.
