I've always soaked my headgear. I've done three balmorals and a couple Hoquy berets, and all fit fine. They did snug up a bit initially, but no where near a half size. Cold water shouldn't shrink a hat much, if at all. Water is used as part of the felting process anyway; your balmoral has probably been submerged at least once so far... If you let the damp bonnet dry on your noggin, you should end up with a perfect fit. If it's still a bit loose, repeat the process. It's worked fine for me a number of times.

As for ribbons: On my balmorals, I tie them up and stitch them in place. Loose ribbons on a balmoral remind me of Donald Duck, but to each his own!