I've read online that there is (or was) this setting to make dungeons smaller in size, either available in settings.ini or in-game. However, I can't find such thing in the GoG cut. Is it included by default? Gog's cut doesn't seem to have this settings.ini, only settings.json. Thanks for any tips!

From what i remember the daggerfall unity build in that "cut" thing was using an older version of Daggerfall Unity, as on current version of DFU the setting should be available in options.

But for old versions, to enable the smaller dungeons you had to go to
C:\Users\YourUserName\AppData\LocalLow\Daggerfall Workshop\Daggerfall Unity\

Open the file "settings.ini" with your favorite text editor

scroll down to the category
[Experimental]

And add (if it's not there already) or change if it's on False (by default it should be) to
SmallerDungeons = True

If there's no category
[Experimental]

, just add it manually :

[Experimental]
SmallerDungeons = True

The gog.cut used a very old version of DFU with a questionable set of mods.

You're better off installing Daggerfall and then manually installing DFU. You can then add any mod you like.