The NEC wants you to avoid overfilling a conduit so that the conductors can dissipate heat, and so you can remove a conductor without damaging it. See NEC 300.17.
There are only 9 single pole circuits (so 18 conductors?)
Ground conductors count for equipment fill, so you have more than 18 -- maybe 23?
Ironically, when you get close to a fill limit, the NEC actually wants you to increase conductor size, because that reduces heat.
Should I be worried or just put the cable through it anyways?
If this was my house, I would want to add a new conduit, if only because pulling the new conductor will be so much easier.
Do they make "reducing" hubs?
Yes. Here are some examples: http://www.thomasbetts.com/ps/endeca/index.cgi?a=nav&N=3819+598+4294951140&Ntt=
I've always found I needed 6" of conduit to make the transition between the reducer and the male fitting that connects to the box. Luckily my local hardware store will sell PVC conduit by the foot, so I don't have to buy a full stick for this.
As @Tester101 mentions, you can also make the hole bigger. A step bit is a nice tool, but 1 1/4" conduit requires a knockout that's actually ~1 3/4". The one he linked to only goes to 1 3/8", and I haven't seen bigger.
The professional way to make a larger knockout is to use a punch. They're a little expensive. Maybe you can find an electrician who will punch the hole for you in exchange for beer or a favor. Or maybe a tool rental place will have a bunch for you.
You don't have to bring the conduit in through an existing knockout - you could punch a hole on the side in a blank area, if that's more convenient for you. Alternately, if there's a good spot with 2 small knockouts, you can consume that whole area.
In your existing installation, I think the lock washer is upside-down. There are sharp edges that are intended to bit in to the metal, so it won't come loose. Unfortunately fixing this means undoing a lot of wiring.
Also, I think you should use a bushing to protect the conductor from the end of the conduit. Whether your inspector will require it is difficult to guess, but it's seems like cheap insurance. Something like this:
Also, I hope that if you're going through the trouble of pulling a big conductor to a new location, you're installing a subpanel at the other end. Because subpanels are awesome.
If you're working with leftover materials, you can surely pull 12/2 nonmetallic sheathed cable through conduit. You'll want to avoid lots of bends and long runs, as it will make pulling the cable more difficult.
If you're up for buying some wire, you might find it easier to pull single conductors through the conduit. Stranded wire is often easier to pull through conduit, though you might find it more difficult to terminate at devices. You could pick up a 25' roll of #12 THHN stranded copper, for about $8.00. You'll want 3, one black (ungrounded "hot"), one white (grounded "neutral"), and one green (grounding).
Since you're using a 15 ampere cord to supply power, you can use 14 gauge wiring instead of 12. If you're buying new wire, this could save you some money. If you're using materials you already have on hand, there's no problem using larger gauge wire than what's required.
Installing UL listed power strips is a safer bet. If you know what you're doing, there's nothing wrong with a custom solution.
Best Answer
There are a couple of simple solutions. One would be a simple PVC raintight junction box. You would drill holes for the 2 conduits coming in and one in the back for entering the home. Use the right sized male adapters. Be sure to caulk where it enters the home, esp. if subject to weather. If subject to severe weather you might look into using rain tight fittings (yeah, I know, nothings "really" rain tight, but we do our best). You could also use an entrance ell (tee type) that has can accomodate 3 conduits.