Is there a way to limit the Asset upload directory in Redactor?
No. You'll want to use a Matrix Field with an image block.
That said, it's possible you could create a Redactor button that does this via a plugin, but it'd probably be a bit of work.
Does anyone know the Redactor setting to set the default size of the editor?
The setting your looking for is
minHeight. Here's an example:
plugins: ['fullscreen', 'pagebreak'],
A longer discussion on custom Redactor toolbars and a few more examples can be found in this article: Custom Redactor Toolbars for the Rich Text Field in Craft CMS