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If a block is closed again, the dialog only reduces its height, if the reduced form occupies less than 2/3 of the current height. This avoids too many movements in the interface. If a dialog chooses to not reduce its height, the superfluous space is inserted right above any possibly existing buttons within showing notification message or else above the bottom edge of the form framebox. E.g. in the mockup above, this space would be added between the "language settings" block and the field description message (similar to what is defined for multi-step process forms).
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Additional notes
The form features a frame if If presented in a dialog, the form is embedded in a colored frame, which contains the button for aborting editingall controls for navigation between steps. It also contains the title of the form. All controls related to content submission and also a "cancel" button, in case the form is not shown inside a dialog, are positioned inside the form blockany buttons for submitting the form, cancel submission in a review step or closing a help screen. The form box should focus on content, the frame on control. If the form is presented on a page directly, leave out the frame, but still ensure that the form itself resides in a box and the controls are arranged around it using a layout much like in case of the dialog.