Here is what I figured out and worked for me!
I know sometimes those labels can be huge for the pack that you are sending, well here is a solution, it worked for me with the program that came with my printer, hopefully the program taht came with your printer works for you too. Anyways, I'm not sure if it has to do anything with the printing program that comes with the printer!
While in any program, say Microsoft Word or Internet Explorer, go to print preview of any document or page, on the size % (where you reduce or enlarge) select 70% or 75% and print that page. Now that should be the default size of your next printing jobs; you can always change it to any other size at any time by doing the same procedure and selecting the size desired.
I really suggest you not to go bellow 70%, I'm not sure if USPS will take it, I haven't have the chance to find out, if you do please let me know :)
Well I hope this guide will help you. And remember that you are not supposed to send regular letter envelopes through Paypal shipping, that is why the labels are big :) ...anyways it will be way too expensive to do do it through Paypal than regular mail. Paypal calculates charges for packages and not for letters. :)
Hope it helps!!!!