So, there are many bantam breeds of chicken that have standard sizes as well. Wyandottes, Plymouth Rocks, Brahmas, Cochins, etc, etc. So, I'm wondering; how does a standard-sized fowl become a bantam? I hypothesized that bantams are created from standard fowl through many generations of cross-breeding (or in-breeding), which gradually reduces the size of the offspring. Therefore, when the offspring are bred together, they produced the same, small offspring, which eventually led to bantam sizes. Is that right? Does anyone have a better explaination for my question?

I am sure you're right -- this will be the result fo selective breeding, like pretty much all domestic animals: pigs with lots of flesh, cows that yield lots of milk, etc.

Maybe the real question is: why did anyone take it into their heads to breed smaller chickens? You would surely expect the opposite. Wikipedia suggests "Bantams are suitable for smaller backyards as they do not need as much space as other breeds".