On first look I thought it was a matter of just changing this: https://searchfox.org/mozilla-central/rev/98a9257ca2847fad9a19631ac76199474516b31e/browser/themes/shared/customizableui/panelUI.inc.css#326 to use `padding-top: 0`, but I can reproduce this only if the Library item is "lonely" in the overflow menu- having 3 items there (the Library included) doesn't make this reproduce. With the Library being the only item in the overflow menu, JS sets the parent `panel-viewcontainer`'s min-height to 94.6667px, while with 3 items there, the same parent's min-height is set to 158.667px. Toggling it off makes the issue reproduce also with 3 items in the overflow menu.
Bug 1711680 Comment 1 Edit History
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On first look I thought it was a matter of just changing this: https://searchfox.org/mozilla-central/rev/98a9257ca2847fad9a19631ac76199474516b31e/browser/themes/shared/customizableui/panelUI.inc.css#326 to `padding-top: 0`, but I can reproduce this only if the Library item is "lonely" in the overflow menu- having 3 items there (the Library included) doesn't make this reproduce. With the Library being the only item in the overflow menu, JS sets the parent `panel-viewcontainer`'s min-height to 94.6667px, while with 3 items there, the same parent's min-height is set to 158.667px. Toggling it off makes the issue reproduce also with 3 items in the overflow menu.