How long and formal should a paper revision letter to the editor be?
The editor needs this letter because she has to make sure that you have adequately taken the reviews into account. She is not going to read your paper to make sure you did.

Thus, in your letter, you have to address each comment and


explain how you implemented it or
explain your good reasons why you chose not to implement it.


Here is a method for writing a letter that ensures that all reviewer comments are systematically addressed.