Ok just fixed it.
I changed the minimum height for the .header-image .site-title a
from 164px to 68px (the actual size of the image) on line 1708-
.header-image .site-title a {
float: left;
min-height: 68px;
width: 100%;
}
Then I reduced the padding on the header right widget area (the navigation area) from 40px (top and bottom) to 5px on line 1723 –
.header-image .site-header .widget-area {
padding: 5px 0;
}
If you want to add more space to the top or bottom you can do so by adjusting either of those sections. Let me know if that looks ok.