My reading and my ruling would be that you take the form of a Tiny bat (such as a flying fox) as opposed to a Diminutive sized bat (like a common or vampire bat).
The ability says you take the form of a bat, but as you note, the mechanical example used is Beast Shape II. So for mechanical purposes, you use Beast Shape II and are only allowed to go Tiny.
The follow on feat, Dire Bat Shape, opens up the ability of Beast Shape II to let you take a Large form.
This was originally part of the Player Companion line, which sometimes has condensed rules language or small oversights (like how bats are Diminutive but Beast Shape II goes to Tiny, the size of most familiars). I think by RAW, you could assume the size of any size bat that was legal under Beast Shape II. RAI, however, it should be a Tiny bat for Bat Shape and a Large bat with Dire Bat Shape.
Possibly. Although one could make the case that "otherwise functions as beast shape II" means "you turn into a Diminutive bat, but in every other respect, follow the rules for beast shape II."
Which is how I'd rule it. But I wouldn't argue if a GM wanted to rule it your way, THUNDER_Jeffro--I think there's enough ambiguity to go either way.
EDIT: I know this isn't an ironclad argument, but I got curious and ran this through Hero Lab. Their team decided to go with a Tiny bat. I'd imagine that was probably simpler to code (just add beast shape II instead of some modified version of beast shape II.) So I guess since I use Hero Lab a lot, I'd have to reverse what I earlier said and stick with the Tiny bat.
