MRR, perhaps I am misunderstanding your question, but you're going to have to say what you mean by "a least squares sense" if you want to compare two sets of points with different numbers of points. The goal of the PROCRUSTES function is to find a rotation/scaling/translation/reflection that makes the distances small between corresponding points. If you don't have a 1:1 correspondence between points, the criterion that PROCRUSTES minimizes doesn't apply.
The line of code you suggests that you want to take one set of points and transform them to be "near" to a subset of another set of points. That's perfectly reasonable, but you need to have the same number of points in both inputs to PROCRUSTES. In addition, that line of code seems to indicate that X has the larger number of points, which is exactly the opposite of your description in your first paragraph. From that description, I would have thought you would want to subset Y to have the same ("small") number of points as X. From there, you could get the last output of PROCRUSTES and apply the transformation to all the points in Y.