Do I need a free nipple graft to get me down to a small size? (Photos)

I would agree with your PS if you want to be that small. Any pedicle approach would lead to a high risk of nipple areolar loss. I can get a similar result with a FNR and a pedicle approach so do not worry. Be aware that you will lose nipple sensitivity, nipple projection, possibly some pigment and ability to breast feed. 

Thank you for the question and congratulations on your decision to proceed with breast reduction surgery. You may be surprised to know that your goals/requests are not that unusual.   I see several patients every year who wish to achieve as small of a breast appearance outcome, for a variety of personal reasons.
 Generally speaking, it is possible to reduce the breasts size very significantly.   The concern with the amount of tissue removed is related to blood flow to the remaining tissue; if too much tissue is removed in one operation the blood flow to the remaining tissue (including nipple/areola) may be compromised. Part of the tissue that is left in place is called the “pedicle"; this segment of tissue is responsible for delivering the blood supply to the nipple/areola tissue. If the pedicle is made too small (in the effort to reduce the breasts as much as possible) then patient will likely have problems with tissue survival.  Occasionally, a staged procedure is helpful; in others, nipple/areola grafting is helpful.
 In my opinion, successful outcomes with  etc. surgery depend on:
1.  Careful selection of plastic surgeon (and from the surgeon's  standpoint, careful selection of patient).  I would suggest starting with the American Society of Plastic Surgery and/or the Aesthetic Society of Plastic Surgery to obtain a list of well experienced board-certified plastic surgeons. Then, I would suggest you visit a few surgeons whose practices concentrate on aesthetic surgery. ***Ask to see lots of examples of their work and preferably speak/see patients who have had similar procedures done.
2.  Careful communication of goals ( which I will discuss further below).
3.  Skillful execution of procedure ( preoperative, intraopererative, and postoperative patient management).
In my practice, I would ask that you NOT communicate your goals, or evaluate the outcome of the procedure performed, based on cup sizes.  There is simply too much variability when it comes to bra sizes between bra manufacturers and even store employees doing the bra fitting measurements.
 Generally speaking,  for the benefit of patients undergoing breast reduction surgery:  it will be very important to communicate your size goals with your surgeon. Most patients wish to achieve a enough of a reduction to help with their symptoms while remaining proportionate with the remainder of their torso. Again, I suggest that you do not communicate your goals in terms of achieving a specific cup size. For example, a “A or B cup” may mean different things to different people and therefore may be a source of miscommunication.
In my practice, I ask patients to communicate their goals with the help of  computer imaging and/or goal photographs,  as you have done here.  Obviously, the outcome associated with the breast surgery will not necessarily match that of goal photographs perfectly, but they do serve as a better communication tool that subjective terms such as "natural", "proportionate", "flat"… Evaluating goal photographs also allows for a plastic surgeon to determine the consistency of the patient's goals and allows for a discussion of realistic expectations as well.  
***Needless to say, when it comes to achieving patient satisfaction with the outcome of surgery,  it is very important that a patient has consistent goals (fully decided on what she would like to achieve) and a good understanding of realistic expectations (what outcomes can and cannot be achieved). 
 Best wishes with your decision making and for an outcome that you will be very pleased with.

You have very large breast and transfer of your nipple/areola complex may be a problem after reduction regardless of the peddicle used. We were very successful in the past 25 years with large breast reductions using liposuction as a major modality of reduction; breast tissue consists  70-90% of fat tissue and liposuction is excellent way to remove fat from entire breast including lateral breast tail. This procedure does not undermine blood and nerve supply significantly (as much as some other methods) and for that reason transposition of distant areola/nipple seem to be safer. Resection of skin envelope and some redundant tissue from lower pole of the breast will complete reduction. Scar is always concealed underneath the breast. In person evaluation with a board certified plastic surgeon is recommended. Good luck.