Electrons orbit at the distance they do due to the Pauli exclusion principle. Otherwise, they would simply spiral down into the nucleus. There may well be emission of energy, as to reach a lower state, the electron would emit energy. You may well need energy to increase back to normal size though.

Really, the Pauli principle is fixed. You can't change it. But if you could, you would emit energy as the electrons in your atoms drop down to lower orbitals.

And what you're talking about is the effects of gravity causing the heating up. The atoms are squeezed into a smaller and smaller space, increasing the temperature. That wouldn't be the case with this 'orbital shrinkage'.