I didn't find any config settings when I tried to get this working - but I was able to get going (only tested in IE however) with the following added to the FCKeditor_OnComplete function on my html page. It may give you some ideas, but if there is another/better way, I'd be interested as well.
function FCKeditor_OnComplete( editorInstance )
{
editorInstance.EditorDocument.execCommand("LiveResize", true, true);
}
Re: How to enable live resizing?