Depending on a number of factors, yes, going down or up .5mm in needle size could make a significant difference. If it's a dishcloth, then no problem. If it's for a scarf, could be, in that if you go up to a larger needle, you will use more yarn, and over a 5' scarf, you could run out because you will use more per row. It it's anything fitted, then it could be a disaster.
Are you familiar with gauge? That's how many sts per inch you're getting. Usually (but not always) the rows you get per inch will not make a huge difference, but the difference per inch is what's significant. Your pattern will tell you what the expected gauge should be, and actually, you can go up or down as many needles sizes as necessary, as long as you're getting the correct amount of sts per inch.
As for the blocking question-- do you mean felting? It depends on how big the garment is to begin with, as to how much you'll lose. For blocking, you shouldn't lose anything in dimensions, although keep in mind that the fiber can only stretch one way. If you stretch it out to add width, it will come out shorter in length, and visa versa. The excepting is lace, where it tends to bunch up pre-blocking, and so when blocked, it "opens up" the holes in the design and will seem much bigger.