I've noticed that the "space\heignt" the pink layout controls toolbars takeup is still visible in widget mode. The problem here is that if you nest like 2-3 layouts deep, in widget mode there's a CRAAAAZY big gap above the widget I've been manually adding this into my code, but I think it's a way better wysiwyg experience....layout titles dont have padding or height on the rendered page, so why eatup space in design mode.
Thank you for reporting this. I discussed the problem with our front-end developer and we agree that the behavior is incorrect, so it's been logged as a bug. here's the PITS:
I have updated your Telerik points!