I'm assuming you're talking about the text options for "menu item"? I've tried various settings and it won't budge the content one bit. What do you mean by checking my image sizes first? I'm getting the idea that I can't have a 360 drop shadow around the background like I have in the first picture.

Exactly.. there is very little play for dropshadow in this area if you want standard sized menus and not have your icons and txt hanging off. Usually I limit myself to 2 pixels of shadow to keep as much actual menu space as possible.