Yes, sprite is going to be large. If it's a 20 pixels sprite, it will be 20 units after you add it. This is why UIRoot is scaled by 2 / Screen.height -- this is what keeps your sprites small on the screen. You need to scale your panel accordingly. Make it small.
Simple steps to adding in-game UI:
1. Create a game object on the layer of your choice, for example "Default".
2. Scale it to something small, like (0.01, 0.01, 0.01)
3. Add a child widget to it (ALT+SHIFT+S for example).