To reduce the size of a Lasarus application do the following:
- Select Compilation options
- Select linking tab
- in debugging section uncheck all options except the last one: remove all symbols from executable
- check the smart linking option

This will reduce the size of your executable to something like 1.3 Mb

P.S. I have tested this on Lazarus 0.9.24 (fpc 2.2.0)