I do not like the large spacing that does not seem to be adjustable in the Windows 7 taskbar. I spent some time googling and found the post below that I have re-posted here. Hooray!

THE GOOD OL’ QUICK LAUNCH SOLUTION

1.Right click on the taskbar
2.Select : Toolbars—>”New Toolbar”
3.Enter this line in the folder line :

%SystemDrive%\Users\%username%\AppData\Roaming\Microsoft\Internet Explorer\Quick Launch

4.Make sure the right folder appeared on the list, then press “Select Folder”
5.Unlock the taskbar

Voila! Seems like you got the good ol’ quick launch bar

via http://windows7forums.com/windows-7-discussion/1163-taskbar-customization.html