One way I figure out things like this is to add some css to create a border around the areas in the page. If you look at the code, you will find the posts are surrounded by a <div...> with a class of 'post'.
If you added
HTML Code:
.post {border: solid 1px red;}
it would draw a 1 pixel red box around the post. if the boxes had lots of space at the bottom, you would know it had to do with something in the post. If the space was between the boxes, then you would know that it is probably padding on the post bottom or top.
Using this methodology, you should be able to narrow down where the space is coming from.
Hint: If you copy the generated source, save it in a text file called 'somename.html' you can open it in the browser and change the code, do a refresh and see the result right away. I tend to do this and rip things out till I find out what is causing the issue.