Adjusting settings in widgetized sidebar

I am running the “This Just In!” theme, and instead of using the built-in sidebar, I am using widgets. I read that WP is set up so it is one or the other — built-in sidebar or widgetized sidebar.

Now that I am running the widgetized sidebar, I’d like to tweak a few settings, such as the space between each widget and the alignment of the top of the sidebar overall. Are the widgetized sidebar settings still governed by settings.php and/or style.css? Or are the settings now elsewhere in a different file?

I know this is probably a basic question, so forgive my newbie-hood! ??

Fyi, this is the code from sidebar.php, which makes me think it may no longer be active once widgetized:

<div id="sidebar">
	<ul>
	<?php 	/* Widgetized sidebar, if you have the plugin installed. */
	if ( !function_exists('dynamic_sidebar') || !dynamic_sidebar() ) : ?>
		<li><?php include (TEMPLATEPATH . '/searchform.php'); ?></li>

		<!-- Author information is disabled per default. Uncomment and fill in your details if you want to use it.-->
		<li class="calendar">
		<?php get_calendar(); ?>
		</li>

		<li><span class="sidetitle">Author</span>
		<p>A little something about you, the author. Nothing lengthy, just an overview.</p>
		</li>

		<?php wp_list_pages('title_li=<span class="sidetitle">Pages</span>' ); ?>

		<li><span class="sidetitle">Archives</span>
			<ul>
			<?php wp_get_archives('type=monthly'); ?>
			</ul>
		</li>

		<?php wp_list_categories('show_count=0&title_li=<span class="sidetitle">Categories</span>'); ?>

	<?php endif; ?>
	</ul>
</div>