I would seriously suggest that you immediately make some rulings, which will restrict shrink item to doing what it was originally meant to do - ie carrying a lot more than is normally possible. Those rulings are:
1. If an expanding item would displace someone or something via it's expansion, then the expanding item is displaced. This stops people from shrinking huge, flat chunks of iron, and then arguing that their rapid expansion should damage everyone in the squares that it expands into.
2. If a shrinking or expanding item will damage something or someone through shrinking or growing (because it is unable to be displaced), then the item which is shrinking or growing will be damaged in such a way that it no longer causes a threat, and if it would still cause damage, then it ceases it's shrinking or growing temporarily.
ie - If you put a shrunken boulder in someones pocket, and trigger it to return to it's original shape it will expand to fill the pocket, and then stop expansion until removed from the pocket. If you try to use a shrunken iron bar to force a door open during it's expansion, then the bar crumples.
What does this stop? Someone shrinking items and then feeding them to someone else to kill them, someone using shrunken items as the ultimate building destroyer, someone trying to shrink a 24-inch shuriken into a regular shuriken, throwing it into a target, and then expanding it again, arguing that it should do large amounts of extra damage, someone trying to argue that an expanding item has any kind of explosive force.
3. Shrunken items cannot be triggered in mid-air. Like summoned creatures, they can only be triggered while resting on a surface capable of supporting their weight.
What does this prevent? Someone trying to shrink a huge, flat piece of iron and then trigger it while it is sailing through the air above someone. Someone trying to shrink a boulder to a pebble, tying it to an arrow, and then claming extra damage upon impact etc.
4. Shrunken items are effectively placed into stasis, regardless of whether the felt or normal forms are chosen
What does this prevent? Someone arguing that they can shrink an item and then continue to use it as normal - like tying shrunken alchemists fire to arrows, so that on impact it shatters and has full effect. Or starting out with a 12xsuper-sized alchemists fire, and throwing the shrunken version for multiples of the base damage.
5. If the shrunken item is ever disassociated into seperate pieces, then the whole item returns to full size
What does this prevent? Using a single shrink item spell to shrink a treasure chest (perfectly legal), and then drawing out individual items from it for use. Basically it stops using a single shrink item spell from being used on a ton of items.
I'm guessing your player is intending to drop or throw huge objects on top of or at enemies, and kill them by constricting them in their own armour. Make it clear that these things aren't possible.
This still leaves shrink item as a massively powerful spell, just not the powerhouse of destruction that it could be read as.