Susano'o is an asshole... which isn't really surprising as during the explanation of who he is here, they said he killed an earth goddess that gave him shelter because of some perceived(<this being the operative word) slight, he killed the host that protected him in a moment of vulnerability because he thought she insulted him somehow... and no, with this attitude I won't believe that she really insulted him and he was right.
Only a god would treat something that destroys lives on so many levels as a festival, the peak of privilege talking of a blight upon the land like it is something to be celebrated.
So why is he small again?
Omoikane, the little floating bell, shrunk him, how it do that? Omoikane is an artifact(?) god, it has the concentrated "faith" from many kami to allow one kami to walk in the land of mortals, and I presume it can regulate how much "faith" the kami it is bonded to receive in any given moment, and as Susano'o clearly is a prick of the highest order... it is there to babysit him too.