The quoted size refers to the size system partition that is created, and the system partition must be big enough for the rom you flash.
Yes you can flash a small rom to a large partition with no side effects,,,BUT you lose the extra space. So a 150 Meg rom on a 250meg partition results in 100meg totally wasted. A 250meg rom won't flash to a 150 partition.
If the rom doesn't tell you what size to use, extract the system folder from the ..zip, and see how big it is, (right click-properties) and add a few Meg.
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