Dialog looks much better now.

browser/base/content/customizeToolbar.js

@@ -198,6 +198,9 @@ var dropObserver = {
 
     var enclosure = document.createElementNS("http://www.mozilla.org/keymaster/gatekeeper/there.is.only.xul",
                                              "toolbarpaletteitem");
+    if (paletteItem.getAttribute("flex"))
+      enclosure.setAttribute("flex", paletteItem.getAttribute("flex"));
+
     enclosure.setAttribute("ondraggesture", "gDraggingFromPalette = false; nsDragAndDrop.startDrag(event, dragObserver)");
     cleanUpItemForAdding(paletteItem);
     enclosure.appendChild(paletteItem);

browser/base/content/customizeToolbar.xul

@@ -38,7 +38,7 @@
         onload="buildDialog()"
         ondialogaccept="updateToolbar()"
         xmlns="http://www.mozilla.org/keymaster/gatekeeper/there.is.only.xul"
-        width="700" height="420">
+        width="700" height="440">
 
 <script type="application/x-javascript" src="chrome://browser/content/customizeToolbar.js"/>
 <script type="application/x-javascript" src="chrome://global/content/nsDragAndDrop.js"/>