What does # cu. ft. even mean?

[Zeful]

For Reference: Shrink Item

Note:

Target: One touched object of up to 2 cu. ft./level

So in the debate a tenth level wizard is casting this spell to get the required 20 cu. ft. Correct?

The measurement of Cubic feet is one of volume in can be annotated as ft³ or as cu. ft. both refer to the space inside a 3 dimensional figure. Since the distance is not measured in feet, for example Fireball, it already is a measurement of volume.

In short: The first interpretation (i.e. 20 1-ft cubes in any configuration) is the correct one.