As with most applications, it could be a lot smaller. But storage is so cheap and abundant that size is no longer really a constraint. Consequently, engineering for size is no longer a priority.
It could. But then where do you set the limit? At my parents house downloading 5GB of data would take a week. So what is the "reasonable" size? 1GB? 10GB? 50GB? Or maybe we can assume that only people with good enough bandwidth will buy a 65GB game online,and the rest will buy the disc?