I'll quote from the relevant bug report at http://jira.secondlife.com/browse/SVC-2741
Prospero Linden - April 21, 2009 - Changing this to a feature request. This is how things are designed right now-- there's a minimum size for the physics collision shape of prims, and the bounding box you get back for small prims reflects that. Changing this may break other content that depends on the minimum size.