http://www.youtube.com/watch?v=xoEbw0Gl3bM&feature=channel
Since MrGrunz asked in comment, yes, this also happens in the AGB-BZME-USA version (tested on console, so no demo), though it took me a bit to figure out how exactly you trigger it (It's not at all hard realtime, once figured):
Equip Pegasus boots (Tested, sword is completely optional.)
Facing towards stump (down, in his vid), push diagonally against stump (down-right in video's case).
Press Pegasus Boots button and hold.
Change direction to against the stump(down), so that you jump on the stump.
Keep holding Boots button, you will dash and collide with stump edge.
Glitch triggered.
effects: you cannot use items, or interact with the world in most cases. edge exits are disabled, as are the stairway-into-ground sort. Ladders are not disabled, nor open doorways, nor beanstalks. You can walk through SOME people, but you cannot use items. Enemies still hit/hurt. Rocks stop you, and cannot be pushed (see: top of Mt. Crenel).
To disable, go to a new area.
This works from any side(that you can walk against) of any shrinker(I tested stones, jars, and dungeon-types as well), it appears. However, you'll always appear to dash/collide downwards- probably because you always face down before shrinking.
Temple of Droplets entrance does this behaviour too, but I got stuck in the boundaries.
So, when will this save time?
The dog in Hyrule Town? No shrinker that is accessible on screen like that, afaik.
It doesn't allow you to go through the deactivated Armos in Wind Ruins. It does let you not trigger the Armos who runs to block you, but it doesn't matter- there's nowhere on either side to disable the glitch.
The guards in Hyrule Castle Garden can still spot you (this will disable glitch).
Can it be used to walk into Hyrule Castle at a wrong time, perhaps? (The Dark Hyrule Castle entrance, at least, works with glitch.)