This is probably impossible due to the nature of how MS has shaped their office / outlook web add-in structure: any add-in runs in an Iframe, communicates with the Office JavaScript API and can trigger dialogs that themselves run in another Iframe.
I would like to remove the padding in the below screenshot:
The padding is (probably) coming from MS' Fabric style library. The problem is that due to the Iframe nature, one does not have access to override those styles. It is, however, very much impeding styling of the dialog to one's design...