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A question about doming washers, does the doming process alter the size significantly? Is there any need to start with washers a size smaller?

It depends on how much you dome the washer, it will...

Yup, you can make them look exactly like a cupped collar, and a domed collar will spread out the peening force over a larger area of the scale to the outer surface of the collar.

A domed collar...

Buy a Dapping block and Doming punch, dome your own. You can buy a set about $20 or make one with a bearing and block of wood.

Dimple the wood with a bearing, then place the washer in the divot...