>>You place 'invisible' vertical line (color=white) besides the field so line's height covers both field height and extra space, and you mark the line the same way as the field: i.e. remove line when blank and print when...
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>This doesn't seem to help in my case :(

I tried and it seems to work.

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>Is there a way to make vertical spacing between text smaller?

What means 'between text'? Do you have a memo field?