Reducing Austria is simple - seeing that it was always a multinational empire, it's collapse could be triggered much earlier due to nationalism. Hungary seceding at any point (revolution or a war lost by the Habsburgs to anyone), Galicia remiaining polish/becoming russian (same reasons as above), Czechia becoming a seperate kingdom under Habsburg rule thanks to some "compromise", etc. Different 1848 revolution could grant you that, as well as different Napoleonic Wars. I don't think it could get smaller than it is at presesnt though, maybe a successfull hungarian revolt could get them Burgenland, but that would be it. IIRC, a plan like the one above was suggested as early as the Silesian Wars, though I suppose a long, devastating war with Turkey in the early XVIII could lead to it too.
As for Prussia, I don't see any reasons for which it couldn't simply annex all the territories in the North German Union and Saxony even - essentially all protestant lands in Northern Germany. It would require a Prussowank, though with an early PoD eliminating Austria as competition as dominante power in Germany it's enterly possible.
So let's say the War of Austrian Succession goes very very bad for Austria, with the Ottoman Empire opportunistically joining into the war to capture Hungary, and succeding. Hungary and Croatia become turkish vassals, Prussia captures Silesia, Czechia revolts and introduces a Hohenzollern to the throne. Austria also loses any influence it had in North Italy to France, it becomes an irrelevent state ruled by a small noble family. Prussia gets a free hand in North Germany, anywhere where France cannot prevent it's expansion. And should France suffer a great defeat at any point, allowing Prussia to capture the Rheinland, you could see it annexing Elsass-Lotharingen as well.