Soundalikes are quite important in Chinese language. Perhaps 小 sounds like another character meaning "rifle". Or perhaps, as you suggest, the reporter got it slightly wrong... 小(small) often means "half", e.g. 小时= "little two-hour-period", and 米 also means "meter". So 小米 could mean "half a meter", the length of a rifle, which could've colloquial speech in revolutionary China.