Hi Adam,
Can you please have a look here
http://www.shoptalk.co.nz/editortest.aspx in IE7 and tell me why preview doesn't match normal mode... preview mode correctly displays the page as it is rendered by IE7 outside of cute editor but, as you should see, normal mode renders the page with excess top and bottom padding. I've tried it without doctype but that puts IE into quirks mode and doesn't render correctly either.
Thanks
Thomas