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.
Best Answer
My house has the main electrical come in below grade (built in 1967 before they knew better). I would get some small leakage coming in around the conduit where it came through the concrete and later hydro-static pressure pushing water right up into the main breaker box which, though inside, was also below grade.
With a un-floored crawl space, some water leakage is probably not a problem but I'd recommend not taking the risk. You can paint the conduit to match the house and it'll be basically unnoticeable. Or plant a bush in front of it. Or run the wire to the side somewhat and come out of the ground someplace less noticeable.
It's also much easier to run the conduit into the house if you can go through wood framing rather than a concrete foundation.