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The Kobo forces a minimum line-height in the .body of the CSS. (I forget what exactly the number is, but it's somwhere around the 1.5 mark).. That's why trying to reduce line height is not helping you. The problem I think you are having with this particular book, however, is the font size is being reduced somewhere outside of the paragraph/div element,, (maybe in surrouding spans.).. the result of the shrunken font size, with the kobo minimum Line-height argument, is the really large spacing you see.
I would try to find and remove the font-size that is shrinking the text. (and then apply a font size to the body if needed to adjust the size of text, or re-run calibre epub to epub converstion without disabling font size recalling)
If you need assist, try using the epub scramble plugin to create a version of the book you can post here (or pm), and I'll fix it up, post the .css
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