Font size can also be changed by editing the skin in Resource Hacker. It's right next to the font name.

The font size can be negative or positive. A negative size measures the character height and a positive size measures the cell height of the font. Since the cell is usually taller than a character, a font size -10 is usually slightly larger than 10.
Make sure you edit it correctly (there isn't just one font related value but many):
Main_font="Segoe UI",normal,-10
Change it correctly to:
Main_font="Arial",normal,-8
Also, if you are directly modifying the skin inside C:\Program Files\Classic Shell\Skins instead of copying it over somewhere else, then make sure Resource Hacker is running as administrator (since everything under Program Files is UAC protected). It's also better to exit the Classic Start Menu if you are modifying a skin which is in use by the Start Menu.