Originally Posted by AnemicOak
...The best way to remove the spacing is probably to change the .epub extension to .zip and then edit the style(s) that are causing the space. ...
... or by using Sigil to edit the ePub.
The problem my be in Styles (CSS or the <style> section in the <head> of each xHTML file) and may be some "empty paragraphs" placed between each paragraph. These often are in the form of <p> </p> but sometimes you'll encounter one that has each chapter in one big <p> and uses <br />'s to create the visible paragraph breaks. Calibre can't heal all of the many possibilities.