I tried the code snippet below to remove the top and bottom paddings and it is working for me.
div.RadTreeList .rtlHBorders .rtlR > td,
div.RadTreeList .rtlHBorders .rtlA > td
Give it a try and let me know if you still can not achieve the desired functionality.
the Telerik team
If you want to get updates on new releases, tips and tricks and sneak peeks at our product labs directly from the developers working on the RadControls for ASP.NET AJAX, subscribe to their blog feed