Yes, HDClone (in its current version) can clone to smaller disks, regardless of it being NTFS or FAT. It simply does a reorganization of the file system, moving the files that would be cut off simply a bit forward.
When I try to copy my windows 7 pro drive it continually reboots on the new drive. When I try a windows 7 repair (IE boot from DVD) it stops a couple minutes into the repair and says it cannot repair it. When I look at the log that it wants to send to microsoft it says the Signature is unknown. I am using HD CLONE 3.9. Have I missed something during cloning?