How do I make TLbar smaller?

So this means my copy is illegal?

It's possible. An unregistered (evaluation) copy of TLB has an image that looks like this: at the far left of the bar (occupying the space you claim to be having trouble filling). It also has a pop-up window that appears every 3 or 4 times you use it to launch something. If your copy has these two things, it is not illegal. If one or both has been removed or altered, and you have not payed to have your copy registered, I'd say it is illegal at worst, or unsupported at best. You can download the most recent (legal) versions of TLB and its plugins at www.truelaunchbar.com.