It sounds as though you need to move your saddle forward. If you are having to push yourself back to get your sit bones on the widest part of the saddle, it must be too far back. Moving the saddle forward a bit will also help with the knee-over-pedal-spindle thing. A shorter stem and/or one with more rise would certainly help with reach to the bars. I don't think the sizing of the frame will be too far out (I'm 5'3" and used to have an XS OCR3 that I wouldn't have wanted any smaller), but you DEFINITELY need to take it back to the shop and get fitted properly!
Drink coffee and do stupid things faster with more energy.