Is there a way to decrease the size of this popup?
If you're comfortable with CSS you can adjust any element in the style editor, but no there isn't a stock method of making that popup smaller.
I only see a left and right island option. Is there a header/footer island?
We want to show banners.
There is a header/footer section in the Control Panel at Display -> General -> HTML Includes
Other placement options would have to be modified into the code, however we cannot provide support to forums which have been modified as custom changes can break the underlying code.