Magic armor sizing, sale and xp questions

So my current group has cleared out about half the first level of Dwimmermount (minor spoilers ahead), and pretty soon they’ll attempt to take on the cavern section. One of the possible treasure finds is a suit of chain mail +1 worn by a dwarf. Nobody in the party (4 humans, 1 elf, 1 Thrassian and 1 kobold (the beastman kind, not the dwarf-gone-wrong kind)) is close to being the body type that could wear armor sized for dwarves. My questions are:

  1. Does magic armor resize to fit its wearer, and are there any limitations to this?
  2. If the party decides to sell the armor for 5,000 gp (or something in that neighborhood) do they get xp from that sale?

I’m worried that they may level up to quickly at the lower levels by selling a magic item or two.

1.  This is a time honored decision for the individual judge to make. I personally tend to assume this is the case since it seems to feel bad to do otherwise, and "a wizard did it" so you don't have to fret about realism

2. I believe the RAW is pretty clear on this: if nobody uses it from the time the party finds it to the time they sell it, they get XP. otherwise it's just gold.

[quote="wmarshal"] I'm worried that they may level up to quickly at the lower levels by selling a magic item or two. [/quote]

In the worst case they actually do, then they spend longer at that level because they're slumming it a little, fighting below their weight.

As it happens, my off-line party recently chose to keep the only treasure they claimed off a sinking island, a +2 sword of Charm Person and a +2 shield.  (Mixed-level party, highest are 5th, a couple of +1 weapons already.)  I'd guessed they would sell at least one, but sometimes they surprise you.