Can halflings naturally fit through that entrance?
I don't think so but they should be able to.
All of the spell features actually do seem to be function as per the handbook, interestingly enough, even if the spell doesn't say so. Your size category and weight do both change. In particular, this can make throwing your party members somewhere important much easier, when you can reduce their effective weight to one eighth.
The bit that makes me sad is that in 5e you can target objects with this spell to enlarge or reduce them, but in BG3 it's creature only.
I must agree that you should be able to enlarge or reduce objects.