Why do you think the characters in FF games,have such big weapons?

[Croyles]

Ehhhhh, shuriken are supposed to be the size of your hand. How on earth is Yuffie's NOT oversized?

No, they are many large Shuriken that are use as weapons in Japanese fiction. There are called Fuuma (or windmill) Shuriken

Exactly, fiction. They are oversized. If Yuffie's shuriken is not oversized because it has appeared in anime before, then no FF characters weapon is too big. I have seen bigger swords in fiction that is NOT final fantasy.
Its like saying Darth Vaders helmet isnt oversized because Darth Helmets helmet was even bigger.
If you mean 'oversized' in terms of to the point where it looks ridiculous even in terms of anime/games, then thats a different matter .