I saw some really cuuuuuuuuuute dwarf puffers at my LFS and I have one question.
Do dwarf puffers become really big and puffed up when they feel treatened? ( you know, like there marine cousins)

They do puff when threatened or bothered. Its actually a serious stress response and can kill them. I found one of mine puffed and dead on the filter intake once. Another time two of mine were fighting over a worm and one bit the other and the victim instantly puffed up and then deflated. It was really interesting.

Dwarf puffers are freshwater and get about 1.25" long. The longest Ive had any is a year though they do live longer than that. They are almost all wild caught though it is possible to breed them. I really dont suggest keeping them with other fish. I have two in a 30 gallon and keep them with dwarf tetras (ember/amaandae tetras and cardinals) and those guys get along fine, although the puffers do nip at my corys. They are pretty aggressive for such small fish so based on experience I do suggest keeping a species-only tank (or a large planted tank like mine with small quick-moving tetras).

dwarf puffers are starting to look more and more interesting to me and I dont know if I should set up a new tropical, coldwater or betta aquarium.

If when I was purchasing dwarf puffers and the people at the LFS were trying to net them woul the fih get stressed and inflate?