That theme is really best for 1024 and up given it's thick boarders. Right now it only has 10px margins around the theme, but you can certainly get rid of those by opening the theme php and finding the line:
Code:
echo "<body bgcolor=\"#E9DFCD\" text=\"#000000\" leftmargin=\"10\" topmargin=\"10\" marginwidth=\"10\" marginheight=\"10\">";
And change the 10 to 0 for the margins.
Shrinking the blocks is tough, the upper and lower corner graphics are 30x30 so if you shrink it there won't be much room for the block titles.