You can set them to contract (slide in filemaker terminology), but not to expand. The effect is only visible in preview or when you print/PDF the layout.
Check out the Sliding and visibility options on the position tab of the Inspector. You can slide a field to the left or up and can set it to resize the enclosing part to eliminate extra blank space in your layout. In most cases you have to set all layout objects to slide in the same manner from the first field you set to slide donward (slide up) or to the right (slide left) to get the desired result.
Another way around it could be this...is there a way to conditionally format the body of a layout record in a report as opposed to certain objects. At the moment i have the weekend days going red (which is leaving me these red text boxes that are often too long for the data...if i could have the background of the body also turn the same red depending on the day of the week this would hide that extra field space.
You could place a blank field in the background and format it with the conditional format, leaving the forground fields transparent, but I don't think that will look right whenever the text in the foreground fields extends past the height of the background field. You might be better off changing the color of the text instead of the background.