I don't know if it is the answer that you are looking for, but there is often a separate mdl-file associated with each model, named Portrait_modelname, which is in the same directory in the mdx-file as the model's mdl-file. I would guess if you modified Paladin's portrait model, probably called Portrait_Paladin, you might end up with a portrait model for the dwarven paladin. There may be an automation with the naming of these two mdl-files so that if you have a model named "modelname", it automatically uses a model "Portrait_modelname" (in the same directory) for its portrait. If there is no automation, it may be necessary to somehow define the portrait's filename in the model's mdl-file.
I've seen also another way of making a portrait for a model. This uses an animation called "Portrait." I don't know more about this or if it really works. You could try to add an animation called "Portrait" (e.g., copy from stand animation) and see how WarCraft reacts.
About the scaling issue, it is of course easy to do in World Editor. But scaling the model in the program (3D Studio Max?) requires just rescaling of the axis. I would be surprised if there would be no such functionality in 3DSMax. But I'm not surprised if you have hard time finding such functions in 3DSMax; I've taken a look at the program, and its user interface could sure use some redesigning.