Good to know. I tried something simpler first and it worked.
Here is what I did, in case it helps someone else.
Assuming that the problem had to do with the launcher settings being corrupted (because everything else was fine), I went to Settings / apps and deleted the "data" for adw launcher, restoring it to default.
Checked that widgets resizing problem was gone - it was.
Then used adw built in backup / Restore to restore its saved settings.
It worked! Everything is back and everything works correctly.
(for newcomers to android like me, this was less stressful than re flashing)
Thanks for the help guys. You're great.
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