This was something that I wished for a long long time... and finally it's doable!
Here's the little software that does the trick:
http://rammichael.com/7-taskbar-tweakerThere's only one problem: it doesn't work for the taskbar on the second screen. So if you're using a multidisplay setup you'll have to wait for a future version of the software.
Make sure you right click on the tray icon>advanced settings and set the no_width_limit = 1.
And that's it... you can now enjoy small icons in a narrow vertical taskbar!