I live in a house that is about 100 years old. We have a shower in our mud room (I believe it was a beach shower at one time) and we wanted to remodel it. The floor has a huge cast iron drain. we wanted to make the drain smaller and put down pebble tile. Not quite sure how to make the drain smaller or what we need to do to put the tile down on the cement that has been painted with marine paint. Do we have to put down plastic? Any help would be greatly appreciated.

You'll need to remove most of the paint before you thinset and tile the floor. Assuming that the floor is painted concrete now so adding a layer of tile will also raise the floor up by the thickness of tile + thinset. This means that you should be able to find a more conventional sized shower drain. Hard to describe how to make the new drain fit into the old without seeing what you have now, but the basics would be to somehow fit the new drain assembly inside the old, with it raised up to the point so that the new drain is level with the top of the tile. There are several different styles of drains available in PVC - hopefully one of those will fit inside your drain.

you will have to cut/bust the concrete floor around the drain to change it out
i would leave it alone if it was mine
kinda,,like,, if it aint broke dont fix it
but if you really want to
bust the floor and remove the old drain. and replace with new