I had exactly the same problem here. The blank spaces are caused by different sized thumbnails. I see that you have a lot of those. Also NextGEN has bug (v1.7.4) when resizing the thumbnails individually (Manage gallery > Edit thumb). The height of a generated thumbnail is sometimes off by 1 pixel. This is enough to cause blank spaces. Initially I fixed it by enforcing the size of the thumbnail in css. However a scaled thumbnail will appear blurry. Now I enforce the size of the bounding box.
(wp-content\plugins\nextgen-gallery\css\nggallery.css)
.ngg-gallery-thumbnail-box {
width: 128px;
height:128px;
float: left;
}
