I'm running on a 1024x768 resolution, so I know what you mean. In my opinion, it's an issue with GTK itself, as no theme engines seem capable of producing a compact theme. Humanity is about as compact as possible right now (without sacrificing usability).
Originally Posted by taavikko
If you want smaller icons, edit ~/.themes/Humanity/gtk-2.0/gtkrc, and change this line:
gtk-icon-sizes = "panel-menu=24,24"