I researched this in depth a couple of years ago. I even wrote AOPA with the question and they responded that 12 inch numbers were required to fly into Canada "because you will cross the ADIZ". They were wrong. If you fly the Highway to Alaska, you do not cross the ADIZ. In my research I found that almost everybody makes the assumption that large numbers are required, understandably so because it is confusing.

There is also a pdf file in my photo album that displays the Alaska ADIZ if you click on it. I couldn't figure out how to post it here but try clicking this link:
http://www.backcountrypilot.org/gallery/albums/userpics/12489/Alaska_ADIZ.pdfFor aircraft 30 years or more old, they can be 2 inches.
https://www.aircraftcolor.com/faa-regulation-excerptThe pertinent paragraph is:
14 CFR Part 45
Identification and Registration Markings
Subpart C--Nationality and Registration Marks
Sec. 45.22 Exhibition, antique, and other aircraft: Special rules.
(b)
A small U.S.-registered aircraft built at least 30 years ago or a
U.S.- registered aircraft for which an experimental certificate has been
issued under Sec. 21.191(d) or 21.191(g) for operation as an exhibition
aircraft or as an amateur-built aircraft and which has the same external
configuration as an aircraft built at least 30 years ago may be operated without displaying
marks in accordance with Secs. 45.21 and 45.23 through 45.33 if:
(1) It displays in accordance with Sec. 45.21(c)
marks at least 2 inches
high on each side of the fuselage or vertical tail surface consisting of
the Roman capital letter "N" followed by:
(i) The U.S. registration number of the aircraft;
And here is what our hockey loving friends have to say about it:
http://www.tc.gc.ca/eng/civilaviation/regserv/cars/part2-202-1304.htm#202Canadian Aviation Regulations (CARs) 2011-2
Subpart 2 - Aircraft Marking and Registration
Content last revised: 2003/12/01
DIVISION I - AIRCRAFT MARKS
Requirements for Marks on Aircraft
202.01 (1) Subject to subsection (2), no person shall operate an aircraft in Canada unless its marks are visible and are displayed
(a) in the case of a Canadian aircraft, in accordance with the requirements of the Aircraft Marking and Registration Standards; and
(b)in the case of an aircraft registered in a foreign state, in accordance with the laws of that foreign state.