I am experiencing the same problems, but I did a couple of tests.
I have the following fonts:
Ref_Calibri_Bold_42
Calibri_42_Bold_HD (42 Bold Bitmap Font, Pixel Size on Atlas = 1)
Calibri_42_Bold_SD (22 Bold Bitmap Font, Pixel Size on Atlas = 2)
Creating a new label with the following settings:
Fonts: Calibri_42_Ref
Text "New Label"
Max Width = 150 pixels
Max Height = 45 pixels (To make sure the SD font fits into a single line.)
Max Lines = 1 line
Shrink to Fit = True
First I tested loading "Calibri_42_Bold_HD" into the Reference font.
Adding extra text to this label (i.e. making it say "New Label New Label") will not shrink the font.
If I instead use "Calibri_42_Bold_SD", it will shrink the font to point 22 even though the max height is set at 45. (It does not seem to take the pixel size of the atlas it's on into account.) The green gizmo visibly extends beyond the text, however, adding extra text to the label will not shrink the font further, nor does it add the extra text even though there is still space for the label to grow.
I've tried a couple of combinations of max lines and max height, that doesn't seem to make Shrink to Fit.
I can take some screenshots if you want, Aren.