The specific effects of changing size often depend upon how the size change occurred
A homebrew magic item's effects always work the way the GM says they work. That said, if a changeling witch takes the form of pixie via the GM's homebrew magic item—assuming in pixie form the changeling can fly at speeds comparable to a typical pixie—, the magic item is likely using an effect like the spell beast shape II except allowing a transformation into the shape of a creature with the fey type.
Because this is a polymorph effect, the Table: Ability Adjustments from Size Changes is used then the specific effects of the spell beast shape II, adjusting for the shape of a pixie.
- The effects of the spell beast shape II when used to transform into a Small animal include the transformed creature gaining a +2 size bonus to its Dexterity score and a +1 natural armor bonus. While pixie form makes the former seem reasonable, the latter may be suspect despite the pixie having a +1 natural armor bonus; ask the DM. The pixie possesses low-light vision and a 60-ft. fly speed with good maneuverability, so the spell's effect provides those as well.
- Despite the creature's pixie size and appearance, the creature keeps its racial abilities unless incompatible with the new form. (Again, see the description of polymorph effects).
- A typical pixie can speak, wiggle fingers, and manipulate material components and foci, so casting spells in pixie form shouldn't be a problem, although it may be helpful to drop the spell components pouch and foci before the transformation (see below).
- Confirm the status of the creature's gear upon initiating the transformation. Without knowing on what spell the pixie transformation is based, the creature's equipment could either resize (cf. the spell reduce person) or meld into the new form, limiting the creature's access to it while transformed, as is usual for a polymorph effect.
A Small creature can employ light and 1-handed weapons designed for a Medium creature as 1-handed and 2-handed weapons, respectively, but the creature suffers a −2 penalty to attack rolls with such weapons.
A Small creature can still employ a designed-for-a-Medium-creature magic staff's powers, but a Small creature can't beat up monsters with a staff designed for a Medium creature as the effort necessary for it to wield such a staff is too great.
- A Small creature applies the appropriate size modifier to Armor Class, CMD, CMB, and attack rolls. Further, a Small creature's ability to use some skills is sometimes improved (e.g. Fly, Stealth) and to use some skills is sometimes impaired (e.g. Intimidate). Finally, a Small creature has a different carrying capacity from a Medium creature.
Although easier than it was in Dungeons and Dragons 3.5, changing size is a complex process in Pathfinder. I've found it useful to have a whole second character sheet filled out for my resized character. I suggest you do the same once the specifics of the pixie transformation ability are confirmed.