After browsing literally thousands of complaints, Google finally issued a fix for the double spacing on the Chrome favorites and right click menus.
And it works.
http://www.pcworld.com/article/2033602/how-to-decrease-the-spacing-in-chromes-bookmark-lists.html#tk.rss_all
Or, I guess they fixed it, maybe the gurus at PCWorld figured it out. No matter, it works.

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