I don't see why it couldn't be made a little smaller by tightening up the gauge with smaller needles.
I looked on
www.ravelry.com and there are over 200 projects photographed. Lots in different types of yarn. I did notice that some of them seemed to have a loose gauge and I think any stuffed toy looks better with a firmer fabric.
I didn't click through to them.. but Ravelry also showed that there were 33 blog posts about this design. That could be 33 pieces all from the same site.. or 33 different bloggers, I don't know

Perhaps if you google this pattern you might be able to find out more.
There is a cute teddy bear in Erika Knight's Book Knits For Cherished Babies too. A conventional bear a bit like this Bobbi one. Its a lot, lot smaller ! (I've knitted it and can vouch for it)
Hope this helps!
..oh and for what its worth.. I'm sure any newborn and its parents would love a knitted toy, no matter what size.
cheers
MM