I have done a little bit more digging by calling:
context.GetService(IWindowsFormsEditorService) in the GetStandardValues method of my TypeConverter.
Inspecting the properties of the type returned (PropertyGridInternal.PropertyGridView) i was able to find a RowHeight property that is set to 15 that would explain the behaviour. Unfortunately I can not set that property due to that objects protection level.
So it would seem that I will have to implement a UITypeEditor to achieve what I want.
It would be nice to be able to control the default behaviour somehow because it is a bit naff that I have to create a custom editor now for all lists that have 15 or more items in them just so I dont get a sizeable grip.