Possibly. General rule is to take the largest, hottest, earliest, most desirable pod(s). But, then again. it could just be the conditions you're growing in THIS season that's causing the small pods, so future generations (especially something like a hab where the DNA is stable), may keep the normal size trait in line. I'd save a few of the largest small pods or resupply my seed stock.

1)Should i let the pod fully rippen? does it matter if only half the pod has turned color?

and

2)should i deseed then dry the seeds? or dry the the peppers?

I like to let the pod fully ripen or pretty close to full, but by the time it starts to change color, the pod is fully developed and seeds should be viable. One thing to look out for--- blemishes, pits, insect holes and the such will cause a pod to ripen prematurely and thusly, produce immature seeds.

Split the pods in half. Pull seeds out. Place on plate. Let dry at room temp for a week or two. Throw in envelope or small ziploc bag. Label with variety and date. Store in a cool, dry, dark place. WASH HANDS THOROUGHLY.