There are plenty of things in Word that "sound like" they do something but
actually do something else.
"Shrink to Fit" was intended for reformatting the short memo or letter that
spills onto a second page by a line or two. With one click, it reduces the
font size from, say, 11 pt to 10.5 pt. It won't go down to 4 pt unless you
seriously abuse it -- and that would be your fault, not Word's. As I said
before, it's OK for a quick-and-dirty job, somewhat like using a screwdriver
where you should use a chisel. If you want good workmanship, use an
appropriate tool.
"Shrink to Fit" has nothing to do with scaling from one paper size to
another. There's a separate setting ("Scale to paper size" in the Print
dialog) for that.