Were you looking at the remote in person, or on the web?
I've got a buddy at school that has a remote, and I don't think it's that big -- at least for me. I would guess it's about half the size of the iPod shuffle -- give or take. He keeps his iPod in his backpack on his back, and the remote cord is long enough to wrap around to his frontside so he can keep control of the music...
As far as I know, the iPod remote is still a "1st generation" device -- I don't think they've ever updated it since it first came out... I think it'd be possible now to make it much smaller, but smaller doesn't necessarily mean better: the layout of the remote is such that it can be operated by touch, and once you make a remote so small, any smaller and it may be difficult to use easily.