No padding

Again, see: https://www.ads-software.com/support/topic/shows-the-name-of-what-widget-was-there-even-when-widget-is-removed?replies=2

Also see the warning on the description here: https://www.ads-software.com/plugins/widgets-in-menu/

It cannot accommodate the visual aesthetics automatically. You’d have to write your own custom CSS for this.

So where does the CSS go?

In your theme or using a custom CSS plugin (from Jetpack, for example)