I have been looking into this a little and it seems that the conflict might be coming from some styling that is applied to the content div. It seems that when I get the page to have only this side nav area and the content the problem is still present, but when I remove the content div it gets rid of the spacing.
I have not found a setting that makes it all correct but I think this is where you should be looking. If you have not done so already you may want to try adjusting one of the padding or margins to a negative value to see if it has any better effect for you.