Well, I'm answering my own question - seems that nobody had an idea how to sort this.
It appears that the icons change size depending on the size of the panel - and at the same time depending on what size is selected will either give some white space around the icons, or in other sizes, not. Setting the height of the panel to 29 makes the panel an average size, but the icons then gain some white space. Setting the panel to 21 makes the bar nice and thin and also makes the icons have white space around them. Sizes in-between mearly change the panel size and don't effect the icons.
I imagine it's something to do with how the scalling code was written in gnome.
So if I stick with a thin panel of 21, this is ok, although the tasks running tend to have their icons cut off at the top.
29 Seems a bit too big of a panel for my taste, but everything gets displayed correctly.
In essence the icons can only be certain sizes. Wierd one, but anyhu