My starter went bad on my 98 gmc yukon 5.7 350. The one I was sold from az is noticeably smaller and lighter than the one that came off. The sound of it starting is a little different too. Does or will the size matter later on?

Also, when you rotate the pulley does it up at tdc every time you hit the mark on the timing chain cover?

Physical size does not matter. When I last changed my starter I spent the extra $$$ and bought one rated as Heavy Duty. It was about half the size in diameter and about an inch shorter then the stock starter. What matters is the amps which will be marked on a tag on the starter.

As far as your 2nd questions goes the short answer is "NO". Your crankshaft turns 2 revolutions for every 1 revolution the camshaft turns so if you are on TDC and turn the crank one revolution so the marks are lined up again you will be off 180 degrees. What this means is you will be on the exhaust stroke instead of the compression stroke.