Ooh I know this feeling very well - seeing a character, whether it be a cat, a fox or a wolf, that seems far to big that what it would actually be. It can be very irritating, and sometimes I feel like saying "Your character is completely out of proportion, chill out with the macho-ness!" Of course, who am I to tell people what size their characters should be? The size gauge on the character creator doesn't have universal units of measurement, and so people will interpret it differently.
Personally, I gauge it on the default starting point in the middle. On the canine model, I'd say the centre point would be the size of an average grey wolf. On the feline model, the centre point would be a average size of a lion. And then I use that as a baseline to decide the size of my character. For example, when making a fox character I'd use my 'baseline measurement'. Going by the size comparison you've shown us, I'd say the fox is around... maybe half the size of the wolf, probably a bit less. So I'd put the slider somewhere between the lowest measurement and the middle one. Maybe adjusting it slightly for characteristics such as gender. This is mainly for realistic characters.
For unrealistic/fantasy characters, huge sizes don't bother me too much...within reason. A demonic dog could easily be quite a bit larger than your average wolf, but perhaps not gigantic. But that's up for debate XD.