Some relevant rules quotes include the following:
"If insufficient room is available for the desired growth, the creature or object attains the maximum possible size, bursting weak enclosures in the process." PHB p. 200
"A shrinking object may damage weaker materials affixed to it, but a reduced object shrinks only as long as the object itself is not damaged" PHB p. 243
If the inner cylinder does not enlarge, even after the reduce spell wears off, it means that physical forces must be constraining it. (or imagine it being subjected to a beholder's anti-magic ray.) Can you imagine how much pressure it would take to compress steel to 1/4 its original volume? I don't think a ring of iron can withstand that much force. And when it bursts, it'll make one heck of a bang.
Unless I'm looking at this all wrong. But even if I'm not, I'm at a loss to calculate how much damage such a pipe-bomb would do.
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I think it would do one of two things: if the constraining ring is thin enough (easy to burst), it will burst and cause a couple of dice of damage in a 10 ft. radius. And a very loud bang. If the constraining ring is too thick, the object will "squirt through" into the astral plane. This is similar to Doppelganger's idea, but the rift is only big enough for the reduced object to pass through. No bang, but a very audible "pop".
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