We consider an impurity with a spin degree of freedom coupled to a finite reservoir of non-interacting electrons, a system which may be realized by either a true impurity in a metallic nano-particle or a small quantum dot coupled to a large one. We show how the physics of such a spin impurity is revealed in the many-body spectrum of the entire finite-size system; in particular, the evolution of the spectrum with the strength of the impurity-reservoir coupling reflects the fundamental many-body correlations present. Explicit calculation in the strong and weak coupling limits shows that the spectrum and its evolution are sensitive to the nature of the impurity and the parity of electrons in the reservoir. The effect of the finite size spectrum on two experimental observables is considered. First, we propose an experimental setup in which the spectrum may be conveniently measured using tunneling spectroscopy. A rate equation calculation of the differential conductance suggests how the many-body spectral features may be observed. Second, the finite-temperature magnetic susceptibility is presented, both the impurity susceptibility and the local susceptibility. Extensive quantum Monte-Carlo calculations show that the local susceptibility deviates from its bulk scaling form. Nevertheless, for special assumptions about the reservoir -- the clean Kondo box model -- we demonstrate that finite-size scaling is recovered. Explicit numerical evaluations of these scaling functions are given, both for even and odd parity and for the canonical and grand-canonical ensembles.
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