Supposing the player leaves Tamriel and enters another world, but he/she needs to be a lot smaller.
Is it possible to scale the player to half size or quater size ingame?

SetScale() would scale the player, however it does not affect the camera height/rigging, in either third or first person.

In addition, when using most furniture, all characters are automatically scale to 1, so the player would snap back to normal size if you allowed this.

So overall, ehhh it can't really be done super well, but it depends on what you need it for, and what you're okay with.

Oh- and I don't think scaling them affects their collision, meaning a smaller player couldn't walk through tiny holes or gaps.

This can be tested ingame with the Player.SetScale X command in the console, unless someone has another way to trying this.