I was not looking at the sidebar…
The space in the recent post in the sidebar between the title and content comes from some empty paragraph tags between the title and the content, as well as the top of the content.
I am not sure how these are getting in.
First thing to do is check the content of your post content and excerpt if using manual excerpts. Switch to text mode and remove all extra line returns.
Eventually check Allow Raw HTML and scripts to prevent WP from doing autoformatting