The extra space comes from the ListViewItem template for ItemContainerStyle. The default template includes space not only for ItemTemplate, but also for decorations, such as flags used to mark selections. Notice the height of the CheckboxContainers 25.5 rectangle and the height of the SelectedCheckMark 34.
<Grid x:Name="CheckboxContainer"> <Grid.RenderTransform> <TranslateTransform x:Name="CheckboxContainerTranslateTransform" X="{ThemeResource ListViewItemContentOffsetX}"/> </Grid.RenderTransform> <Rectangle x:Name="NormalRectangle" Fill="{ThemeResource CheckBoxBackgroundThemeBrush}" Height="25.5" Stroke="{ThemeResource CheckBoxBorderThemeBrush}" StrokeThickness="{ThemeResource CheckBoxBorderThemeThickness}" Width="25.5"/> <Path x:Name="CheckGlyph" Data="M0,123 L39,93 L124,164 L256,18 L295,49 L124,240 z" Fill="{ThemeResource CheckBoxForegroundThemeBrush}" FlowDirection="LeftToRight" HorizontalAlignment="Center" Height="17" IsHitTestVisible="False" Opacity="0" Stretch="Fill" StrokeThickness="2.5" StrokeLineJoin="Round" VerticalAlignment="Center" Width="18.5"/> </Grid>
and
<Border x:Name="SelectedBorder" BorderBrush="{ThemeResource ListViewItemSelectedBackgroundThemeBrush}" BorderThickness="{ThemeResource GridViewItemMultiselectBorderThickness}" IsHitTestVisible="False" Opacity="0"> <Grid x:Name="SelectedCheckMark" HorizontalAlignment="Right" Height="34" Opacity="0" VerticalAlignment="Top" Width="34"> <Path x:Name="SelectedEarmark" Data="M0,0 L40,0 L40,40 z" Fill="{ThemeResource ListViewItemSelectedBackgroundThemeBrush}" Stretch="Fill"/> <Path x:Name="SelectedGlyph" Data="M0,123 L39,93 L124,164 L256,18 L295,49 L124,240 z" Fill="{ThemeResource ListViewItemCheckThemeBrush}" FlowDirection="LeftToRight" HorizontalAlignment="Right" Height="14.5" Margin="0,1,1,0" Stretch="Fill" VerticalAlignment="Top" Width="17"/> </Grid> </Border>
If you do not need selection behavior, you can deprive the ItemContainerStyle of only the parts that you need so that there is no room for decorations that are not relevant to your application. If you need a choice, you can move or resize the selection checks to fit your design.
You can create a default ItemContainerStyle item template by selecting your ListView in the designer, right-clicking and selecting Edit Additional Templates.Edit Created item container (ItemContainerStyle). Edit copy ... 
Then you can edit the height of the jewelry as needed.