Now another question : do you think it would be possible (and not overpowered) for a caster to shrink the area of effect of a spell? Let's say a wizard wishes to cast Sleep in a crowd. Do you think she could shrink the area of effect so it affects a smaller area (and amount of persons)? Couldn't a sorcerer that wants to cast Burning Hands reduce the lenght of the cone so she only hits the enemy that stands between her and a helpless peasant?
For cone spells I really don't see a problem with a sorcerer aiming his hands downwards to shorten the length of the cone produced. It might be a problem if the ground is flammable but its natural to aim up or down to target flying/burrowing targets.
Strategic placement of spells can be very valuable. If you only want to hit a single target with a fireball, aim 20' up from the center of his square. As long as the ceiling(if any) is at least 25' high it will cut down on friendly fire. And it will prob provide an interesting light show for anyone nearby.
In a game I was storytelling I would say no to shrinking the area of a spell with out a feat or class ability that lets them do so. After all lowering the power of the spell might weaken it to the point that it no longer functions, and it makes those class features obsolete. But in 'most' cases the spellcaster just needs to read the range and area of the spell and be good at placement.
Spells like sleep typically hit the lowest hd creature in its area of effect first so if a noble woman wants the best chance to avoid a sorcerer from abducting her its not uncommon for a servant/bodyguard to be very close or even sharing her square in order to protect her.
There are some exceptions, such as you do have to remember summoned creatures must be summoned on the ground in an area with adequate space. Summoning a 60' tall monster in a 10' cubic room to squash the occupants is a nono, as is trying to summon a two ton elephant over your targets head (unless the spell is intended to do that).