It is quite possible to change font sizes (assuming they are not buried in the hardware somewhere though even there you have options). It can be simple and it can be quite difficult with ramifications right through your project.
If it is something silly like a 3x5 font then yeah probably time to change it, if it is something remotely workable then unless you are otherwise hacking in a variable width font then I would not. https://www.youtube.com/watch?v=N_qD3uk7FeQ
looks pretty acceptable to me though I guess if you are going smaller that could work.
Most older consoles and games on them do not use a font handling system like a PC and will have bitmap fonts. Replacing the bitmaps is basic tile editing most of the time, the trouble comes in getting the game to recognise your changes. This typically involves going quite far down into the game code (if you are hacking in a variable width font then you are already playing with the necessary code, if not then yeah you will need the kind of skills that can hack in a variable width font). Similarly many games, especially Japanese ones, will not do auto line break and may be manually wrapped so if you are planning to edit an existing script it can be very annoying for your text handling people. As it sounds like you are starting from scratch that should not be so bad though.