Can I reduce the size of my hot water heater vent or direct the vent out the exterior (house has high efficiency furnace)?
This is one of those questions that is very difficult to answer properly with the info given. Although it sounds like you may be able to downsize the vent/flue because to the change over to a high efficiency furnace, there are lots of considerations depending on the exact equipment you have. The water heater is a different application as well.

In your particular case, I think it would be wise to bring in a qualified HVAC tech to analyze the situation and give you a safe plan ideal for your needs and location. Never cut corners when fire and poisonous gas hazards can result.  Good Luck