Yes, linked reports have a problem. See the following two threads on methods to get around the problem and correct it.

http://www.sqlservercentral.com/Forums/FindPost661300.aspx

http://www.sqlservercentral.com/Forums/FindPost661381.aspx

We now set the page size properties when we create and/or refresh the linked reports as we create the linked reports via .Net C# program.

However, I've also successfully used the Reporting Services Utility (RS.exe) to set the page size properties. See http://msdn.microsoft.com/en-us/library/ms152874(SQL.90).aspx for the technical details of RS scripts.