[TASK] Workspace List: Fix menu list padding and theming

[jenny-s51]

Fix alignment of the filter dropdown items. There is additional left padding applied to the menu list. Apply updated theming and styling as shown below.

Current:

MUI:

[jenny-s51]

/assign @jenny-s51

[jenny-s51]

/area frontend

[jenny-s51]

/area v2

[ederign]

/retitle Workspace List: Fix menu list padding and theming