I think that's a great idea for recycling an old dress - and a fun way to restructure (dress into corset). I've never done that, but I think it would work pretty well. My two cents on how to proceed:
- you will probably need to just make the corset end where the waist of the dress is, especially if you don't want to add boning. i'm picturing what it might look like and am willing to guess that the waist is at the natural waist (i.e. not a drop-waist). So you'll have a corset that ends at the natural waist. That could be cute! If you really want it longer, just cut it off at the hips, and then hem into a cute l'il peplum.
- If you want to make a corset, then you can easily take it in those two sizes. Just chop out the zipper (hopefully it's up the back?) and insert grommets or sew buttonholes up both sides of the back. Then lace shut with ribbon - you can pull it as snug-fitting as you like.
- Of course, save the rest of the fabric and make something cute and matching - I always do that! Good luck & I'd love to see pictures of how it turns out.