http://www.geekyprojects.com/storage/how-to-clone-hard-drive-to-smaller-drive/
I found that you do need to do this the partition method, however, make sure that when you resize the OS partition, to ensure the OS boots afterwards.
Step 1: Download the GParted live CD
Step 2: Once GParted has finished booting, follow the steps in the picture down below.
1 – Click on “Resize/Move” and a new window will appear.
2 – Drag the right side of the partition bar to the left until the desired size is reached.
3 – Click on “Resize/Move” (the one on your current window)
4 – Click on “Apply” when done.
Operating System
Now that we have finished resizing our partition, let the computer boot so it can check the file system and fix any possible errors before we start to clone hard drive.
Clonezilla Backup
Step 1: Download the Clonezilla Live CD and boot your computer with it, click on “Start_Clonezilla” at the first screen of the wizard and click “Ok” to continue.
Step 2: Choose “Device-Image” and click “Ok“
Step 3: Choose “local-dev” and click “Ok“, make sure you have your USB external hard drive plugged in. If it was not, then plug it in now.
Step 4: Select you external hard drive from the list of available ones and click “Ok”
Step 5: Choose “top_directory_in_the_local_device“, this just means that you do not want to save your image inside any of the directories already created in the hard drive. Clonezilla will create a directory and store all image files there. Click “Ok“
Step 6: Select “saveparts” to save only the desired partition and not the entire drive. Click “Ok“
Step 7: Give the image a name and start cloning.
Clonezilla Restore
To restore the image, follow the same steps as in the “Clonezilla Backup” section in this tutorial and when you get to “step 6” select “restoreparts“, choose the hard drive image containing the partition you would like to restore and start the process.