5D embroidery software-resizing

Hello,
I'm new to the forum and not sure if this is the right place to ask, but I have 2 questions relating to the Husqvarna 5D Embroidery Extra software:

1. If I have a 3" design and want to resize to 2" I know I can use the resize tool on the toolbar- but will the stitch density change a lot going down 1"?

2.I have a design positioned in the middle of the 4X4 hoop, and wanted to add lettering to the top and bottom of the design. I've done this many times, but am now having an issue.
Here's the process I've gone through:

- have a small design in the middle of hoop
-go to letters **choose the font**type in the letters I want**click the rectangle box for "layout"** then click APPLY
The lettering is applied on the screen within a rectangular box BUT the selected box extends way past the hoop on the screen.
So, I select EDIT**Select the word with the lasso or rectangular selection**copy**then paste (this was to get rid of the extended box).
I don't recall having to do this in the past.

***** When I go to COMBINE the designs- it says the EMBROIDERY IS TOO LARGE- OUTSIDE THE HOOP*****

I've minimized the screen so I can see if there is anything outside the hoop--- but there is nothing.

I can't figure this out. Any help?

Thanks so much in advance!