Tas, I'd just pack more stuffing into the 'hump' section to make it higher.

Any stretching of the stitches will be covered by his blanket.

If it's a simple pattern made with squares as you say, try less stitches to make the squares smaller, thus making the camel smaller ,and more in size with your nativity set.

Always write down what changes you make to a pattern.  Believe me, it's so easy to forget what you did for the next time.

Joining yarns without a knot -

https://www.jeangreenhowe.com/design8.html