I don't believe she was small in the touhou canon. In the bamboo cutter she was but that's not the same kaguya we know. Also she either gained immortality from her ability or from Eirin, please correct me if I'm wrong, I don't remember if it was mentioned how she became immortal.
She's immortal because she drunk the Hourai Elixir, which was made by Eirin on her orders. Why, exactly, Kaguya asked Eirin to make the elixir is unknown.
And yeah, as far as we know, Touhou's Kaguya wasn't miniaturized when she was exiled from the Moon.
Yeah, Kaguya's reason isn't known at all, but I found some interesting passages in their chapters in Cage in Lunatic Runagate:
"[...] I committed a minor error. That minor error was to give the Hourai Elixir, that is, the elixir of immortality and eternal youth, to Princess Kaguya." [1]
"I think it was the same when I was still in the lunar capital. I became fascinated with Earth due to my boredom [...]." [2]
There doesn't seem to be any definitive Word of ZUN on her reasoning, but if I were to make bold observations based on the above statements, I'd say that:
- Eirin didn't count on Kaguya drinking the Elixir (if she knew beforehand that the princess would, she never would have made it in the first place).
- Kaguya's decision to drink it may have been influenced by her curiosity towards Earth (how influenced she was is debatable).
However, it's still unclear if the princess premeditated this, or simply drank the Elixir on a whim. That is, we have two scenarios:
- She planned this all along, and drank the Elixir when she got hold of it.
- She never had any intent to drink it in the beginning, but as soon as Eirin gave it to her, well, you know.
(The second one draws an interesting parallel with Mokou's case: both were overcome by 'temptation', so to speak, to consume the Elixir when it was within their reach. The difference is that Mokou was tempted by the thought of immortality, whereas Kaguya's was the opposite: transient Earth life.... But that's not the point of this post. :V)
I suppose what truly happened is a mystery for the ages (well, not to ZUN).
(Now on to the actual question!)
In her chapter, Kaguya herself said that she was tiny when the bamboo cutter found her: "I remember how the old couple that found me were especially careful when they picked me up. It's only natural. I was found inside a glowing bamboo shoot in the forest, too small to be thought of as a human being [...]." [2]
At first, I thought that the thing with the Elixir and her being shrunk was a mild inconsistency on ZUN's part, in order to fit in better with the fairytale. But CiLR was released a good five years [3] after Imperishable Night, and he made a point of mentioning that, so it's highly likely to be deliberate.
On a minor note, there is a weird implication from that quote that Kaguya was aware and conscious when she was stuck in that shoot. (Lunarians, what the h-... ?) Also, I got ninja'd twice. :derp:
EDIT: Added Colticide's quote.
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[1]
http://en.touhouwiki.net/wiki/Cage_in_Lunatic_Runagate/First_Chapter[2]
http://en.touhouwiki.net/wiki/Cage_in_Lunatic_Runagate/Second_Chapter[3]
http://en.touhouwiki.net/wiki/Cage_in_Lunatic_Runagate
