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September 7 update change
This change: The bookmark toolbar menus on macOS now follow Firefox visual styles. All the entries are now widely vertically spaced, requiring a lot of unnecessary scrolling which I didn't have to do previously. I don't find a setting for this, so can the spacing be changed back to the way it was?
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Hi Majus, I think the spacing of those bookmarks toolbar folder drop-downs matches the context menus and other toolbar drop-down menus, which all have more vertical space since Firefox 89.
Currently, there is no built-in way to tighten up the spacing. There is work under way to tighten up the bookmark menus that drop from the main and bookmarks toolbar. In Firefox 93 (next release), the optional Compact density setting will do that. Here's a preview from the "Developer Edition" (based on the beta test version of Firefox 93):
However, Firefox 93 isn't scheduled to release until early October.
Unofficial Community-Supported Workaround
Firefox users can modify the user interface of the browser using custom style rules. This involves setting up a userChrome.css file. If this is your first time, make sure to set aside 10 quiet minutes to work through it.
The full instructions are in the following reply: https://support.mozilla.org/en-US/questions/1346577#answer-1435049
@jscher2000 -- Thanks for the response. I'm a patient person, so I will wait for October.