In your style.css of your theme find the text:
.widget_categories ul li, #social-links li, #friends-list li, .widget_text ul li, .spw_widget ul li {
padding-top: 0 !important;
}
replace it with
.widget_extended-categories ul li, .widget_categories ul li, #social-links li, #friends-list li, .widget_text ul li, .spw_widget ul li {
padding-top: 0 !important;
}
If your theme allows to add custom CSS styles through the admin interface you can do that instead of the above, you would only need to add:
.widget_extended-categories ul li {
padding-top: 0 !important;
}