Well the thing is that there is many methods to resize a character, so i'd say experiment and find the one you're the most confortable with.
As for myself i use a lot the shrinking tool in photoshop, playing with the width and height, with the nearest neightboor (or whatever, don't recall the english word for it) pixel option so that it doesn't turn blurry, and fix what is messed (cause of course a lot will be messed to make things fun).
If the result is not yet correct, i erase some parts and redraw the outlines or cut some parts of the sprites and repaste them somewhere else (like blink, i shortened her back arm many times in the last sprite edit that way).
But as said above my method is a bit radical in terms of corrections to do, it's just to keep a better control of the general proportions...
Some prefer to use the total cut and paste then correct the insides method, which have the good point of not shrinking the head in the process (as for myself i don't really care since i usually totally redraw it).
Basically, for exemple cut half of the leg, and repaste it a bit on the other half (not sure this is very clear), then just adapt the muscles a little so that they connect again. Then proceed to another part of the body. I think this may be the quickest way to go with it.
And yeah i agree capcom really overdid magneto in muscles size while trying to give him a boss touch...