Padding is the distance between the Item margins and the content.

Edit the file style.css found in the StyleFolder of your menu and find the css classes parentMenuItem #tm_contentCell and parentMenuItemOver #tm_contentCell. Modify the padding properties of these css classes to set item padding:
.parentMenuItem #tm_contentCell
{
    ...
    padding-left: 20px;
    padding-right: 20px;
    padding-top: 4px;
    padding-bottom: 4px;
}