Hube:
OK. My return duct is way too small and that is why the burners are turning on and off. That is the symptom. What type of issues can I expect because of this? (I am looking for things like waste of energy, cold/hot spots etc). Equipment wise I have to say that I do not have any issues. It has been running this way for 17 years. And also gas use is not really that bad.
Actually "...not really that bad" is all relative:
By running the temp up to the safety high-limit you're likely close to doubling your conducted distribution losses.
By running undersized ducts the blower motor is burnin' more power, adding to the electricity bill.
By running undersized ducts you're running higher duct pressures, driving more direct loss from duct leakage.
By cycling on/off excessively you're wasting a bit of fuel on every ignition cycle.
Were the furnace right-sized for the heating load, and the ducts right-sized for the air handler, "...not really that bad" in current terms might start looking like " not really that great." (Just a WAG, but I'm guessing right-sizing the world would cut your fuel use by a quarter to a third, if not more.)
It's possible to keep maintaining furnaces and keeping them going for decades, but ~20-25 years is a typical economic service life, and by cycling the way it does it's had a harder than average life. Stuff wears out, and while it's usually cheaper to keep on fixing it in the short term, it's not always the right thing to do. New units (even high efficiency furnaces) just aren't all that expensive compared to a few service calls over decade. Shopping for a right-sized higher-efficiency furnace might not be an outrageous thing to think about in the next few years, especially where/when there are subsidies for going higher efficiency. It might have has an 78-80% AFUE in 1992, but as-operated I'll bet it didn't beat 65% in year one, and may have slipped a bit in the meantime. Compare that to a right-sized condensing furnace with a 95% AFUE- you may be able to cut your fuel use literally in half, when all of your overtemp/overpressure losses are factored in.