Yes, a penis can be too small for sexual intercourse. However even a 3" (when erect) penis is perfectly adequate for that purpose, although it is likely to be a very loose fit in many women if it is thin in proportion to its length.

The minimum length that can be made to work for intercourse it probably 2" erect size.

Smaller than that and it's too small for intercourse but can still give sexual pleasure -- however some women have a clitoris as long as 2" and if the underside of the clitoral shaft is exposed the organs can be very similar indeed.

Remember, though, that many women would say that the most satisfactory penis is not usually the longest. A short, fat penis is usually better. So a short 4" penis that's fat is about as useful as it comes.