What happens to Death Cloud when there aren't enough legal targets
Death Cloud does not target. The only time a spell targets is when it says target on the spell (or a keyword on it uses target, eg Enchant X or Support N). Thus Death Cloud will do as much as it can and make them sacrifice all 4 of their creatures.

609.3. If an effect attempts to do something impossible, it does only as much as possible.
Example: If a player is holding only one card, an effect that reads “Discard two cards” causes him or her to discard only that card. If an effect moves cards out of the library (as opposed to drawing), it moves as many as possible.