It is definetly in the 5x7 frame. I did them in gold for christmas. So it will not fit in your frame, also did you download the right format.
You could try shrinking it, with the software.
I agree with simplyrosie. I checked the design page property and she used a 5x7 so it wasn't intended to fit a 4x4 hoop. You could try to change it 1% like suggested but you will have to experiment with a sample. FSL don't always change well, it might fall apart when you rinse out your WSS.
The reason I would suspect Karen is that the design is 3.95 inches. A true 4x4 design should not exceed 3.94 inches.
If you have editing software, you could reduce the size by 1% and fix your problem. :-) teri