In many cases, the "Minimize Windows"/"Show Desktop" applet is placed on one corners of the panel, typically at the right-most side. Especially when the panel height was increased to a two-rowed system tray, the size of "Minimize Windows"/"Show Desktop" is unnecessary big. I suggest to shrink the size of the applet to a small bar (at least when it is placed at the end of a panel).
You can change the maximum size for those applets by adjusting the "Panel" icon size in icon settings.
Created attachment 113827 [details] before, Icon Settings, after
Thanks for the hint. I attached a screenshot with the result. I'll observe how it works out. I would leave the ticket open since "Minimize Windows"/"Show Desktop" is a corner case :) and changing its size should not affect the size of other icons in the panel.
If we made just the Show Desktop icon small, and the click area was just a thin vertical bar, we'd get even more complaints that it looked weird and ugly because it wasn't the same size as other items in people's panels (such as that dictionary thing in your screenshot). There's already a setting to control this for everything, so I don't think there's a bug here.
@Nate: I also dislike the look with the small icon and large click area. For me this workaround is currently ok because I get more panel space and a feeling that the previous large width is really not needed. Generally, I also find it better when the graphics of the Show Desktop area reflects the click area. I wonder if it is possible to have an icon that adapts to the widget shape or let the widget draw something on its own which fits to a rectangular bar shape. Surely, another custom setting should be avoided.