Please forgive me if I’m not understanding you, but the panel icons should scale with panel height, so why not just reduce the height accordingly? FWIW, I’m using KDE 4.12.2, and haven’t experienced any change with icon sizes.
You can resize the kickoff menu by grabbing it at the top-right corner (the bottom-right corner if the panel is at the top of the screen like in your case). The mouse cursor should change to the resize shape when you move it to that corner, click and drag it to the wanted size. Much like you would resize a window.
Btw, I don’t see how the KDE update should have resized everything. Maybe your resolution is set wrong?
Maybe your graphics driver is not working anymore because of the recent kernel update? If you use a proprietary driver, you may have to reinstall it.