I love DropDMG. It makes creating installers so easy.
My default setup creates a file 357,942KB in size. The contents (besides licensing and such) is just a 94MB Mac app bundle.
Can I change the size of the DMG to something smaller?
How are you creating the .dmg file? If you create it from a folder, rather than making a blank disk image first, the .dmg should be auto-sized to be as small as possible. With a compressed format, I would expect it to end up smaller than your .app bundle.