Why are the top and bottom margins so big in booklet and 2 up mode?

This is due to the difference in aspect ratio between a full sheet of letter paper and a half sheet. A half sheet of letter paper is taller with respect to its width than a full size sheet. This leads to more space vertically. To get around the problem, you can use the “FinePrint 2up letter” size paper which can be selected in either the FinePrint Properties or in the Page Setup of your application if FinePrint is the selected printer.