The basic principles of operation of the crankshaft are very simple, its the main hub from which torque and power is transferred to a certain mechanism.
The purpose of the bearings is to hold the crankshaft while it shall not hinder the crankshafts rotation. Now to hold something and at the same time letting it rotate free is achieved by having a "clearance" (Space) in between the shaft and the bearings. When you start the engine, oil enters the bearings and finally form a thin layer of oil in between the crankshaft and the bearings, now the crankshaft can spin freely on a viscous surface. Friction is there but at minimum/recommended levels.
Higher clearances will cause the bearings to spin out of place, they will let the crankshaft play around and it will simply loose balance. Then you will have oil skimming through the gaps and a lot friction is the result.
Lower clearances mean the crank will spin tight and grind against the bearings resulting in irregular surfaces and in the end the engine will just cease up or cause the bearings to break.Lower clearances will also make your engine generate additional heat, as the piston will be producing a certain amount of torque and the crankshafts friction would limit them in terms cycling, and every one knows where there is friction there is heat. With lower clearances you will simply be putting a lot of stress on other parts of the engine, and will eventually result in a something broken. Big time.
Does grinding the crankshaft to a lower diameter, or in simple words grinding it by 0.25 produce any drastic drawbacks. Answer: NO, if the clearances are by the book (manufactures recommended), nothing will be affected.
Rod Bearings. Same as above, the difference is they are in between the rods and connecting rods.
Can i run a grinded crankshaft with a standard size bore and piston with a standard CR? Answer. Yes you absolutely can! In my personal experience i run a engine who's crank is at 0.75 and pistons at standard. Worked great, then i had to bore out the engine to an increase of 1.00. Worked great it just happened to burn more fuel and take in slightly more air as the displacement changed, with that i had an increase in overall performance.
Just find a good, i mean a really good machinist not someone who uses a vernier scale to get things right and around. Find the workshop manual for the specific engine you have, and hand the figures over to the machinist, and it will work out fine. One thing you primarily have to understand not every engine is the same and so are not the specs which most "lullo panjo" machinist think are. I've seen machinist saying all diesels are the same, and all petrol are the same. That is pure BS!
I hope i have helped you a bit and the information is useful.
Disclaimer: All the above information is based on my limited knowledge and experience. Do not solely go upon my advice, but rather get some experts opinions as well.