I have been told not to reduce a design by more than 10%.

I have reduced designs as much as 20% with no problem. Not FSL though. Reduce it till if fits your hoop then test it to see if it is ok. Good luck.

I have reduced designs up to 25% and had no trouble but have to alter the stitch density when I do it and the same if you make it larger

If you just REDUCE the size the number of stitches is kept constant and then 20% is the max. If you RESIZE the design in software the stitch number is lowered and then you can go further. But you have to make a test stitch in both cases as different fillings may give unexpected and sometimes unwanted effects.