When I first saw Arceus, I questioned whether it could really be the "God of all Pokémon."
However, then I began to think that size and appearance has nothing to do with god-like power. If one thinks about it, why would we understand how a god looks? It has it's purpose.
Okay, so I went a little metaphorical with this. After all, it's just a game. However, that is the only explanation as to why Arceus looks the way it does. You have to admit, though, it does appear to have divinity. :/