I noticed that you also posted another question as to moving the control on your front panel and the scroll bar was moving as you did this... very odd.
Have you tried something as simple as resizing the screen manually by moving your mouse to the bottom-right corner of your VI until the mouse pointer turns into a double-sided, diagonal arrow? Then try dragging the window until you reach the size and spacing that you desire? It's possible that the minimum size of your front panel is set under File > VI Properties, thus not allowing you to reduce the size any further. If this is the case, change the minimum size to 0 x 0.
