Wait a minute - your site using Mimetex fallback, isn't it? (No Latex distribution installed) Then changing Density has no effect...
It's a sort of "bug" because Mimetex fallback is using \Large command in all output. If you open file filter/tex/pix.php with an some text editor like Notepad++ and change line
$texexp = '\Large '.$texexp;
$texexp = '\small '.$texexp;
or simply delete or comment out that line
\\$texexp = '\Large '.$texexp;
and purge all caches from Site administration > Development > Purge all caches
to make that change take action
and delete all images from your moodledata sub folder filter/tex
and refresh your browser you should see all Mimetex images smaller
You can use also check commands from http://www.forkosh.com/mimetexmanual.html or try to switch to MathJax filter or add MathJax tags to Additional HTML - that makes using Latex formatting easier
TeX: How to get same formating for the fraction as the rest of sentence.
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