On line 68 there's a fault in the written code that makes the list to be generated in a wrong way.
the original code starting from line 68 is:
if ( $title )
$output = $before_title . $title . $after_title . $output;
if ( !array_key_exists( 'not_widget', $instance ) )
$output = $before_widget . '<ul>' . $output . '</ul>' . $after_widget;
Which should be:
if ( !array_key_exists( 'not_widget', $instance ) )
$output = $before_widget . ($title ? $before_title . $title . $after_title : '') . '<ul>' . $output . '</ul>' . $after_widget;
This will generate the list of posts in the correct way with it's own <ul> to nest tis own <li> in.