Hi, the characters will fit into a 16x32 space (1x2 tiles) in the default state/plain walking animations, it's designed this way so they work well with tile collisions.
The actual frame size (as exported by the generator) is 3x3 tiles. The padding is necessary to make additional room for animations (such as the waapon attacks). If you find that this additional space is a problem for you, then you can crop the frames that you need specifically. It should crop fairly easily in any image editor with snap-to-grid.
The set includes some pre-made NPC character sets which I cropped in this way because they did not use the additional animations, you can use them for reference.
Thanks!