Shrinking will work, but can be tricky.

The easiest way, if you don't use per-layer transparency for the VWM (RabidVWM let's you have the mini-windows, FI, be more opaque than the desk space), is hooking into xLabel.

You'd then have a script that manages what is shown by the current desktop (it could be done w/o scripting if there was no option to show the whole VWM, but it still shouldn't be a big deal).