You can do hand exercises to increase your reach, but you may end up having to buy additional plugs, and just plug any holes that are giving you issues. Trevor Wye describes an exercise in his practice books where you play Low C# by actually placing your pinky on the low C# key cup itself, rather than the C# spatula. Personally, I would opt for the plugs. They're readily available from places like fluteworld (in several different styles), and should solve your problem with the least difficulty. There's nothing wrong with plugging the holes....Many professional players use plateau flutes, or plug at least one or two of the holes on their French flutes. They will not affect tone or intonation negatively, and chances are you don't need the holes anyway (most players do not), so they really shouldn't affect your playing at all.

One very simple thing to do is plug up all the holes on your flute. Don't make it any harder to play then it has to be!
After some years of having hand problems and also having smaller hands myself, I have been plugging the holes on my flute unless I play celtic music where I like to bend the notes, they are not heeded. Your hands and fingers will thank you!