Change whitespace above and below a section heading

You can use \usepackage[compact]{titlesec} to shrink all the whitespace around section headings.

Whatever sectsty is doing for you, you can probably also do it with titlesec. I expect the problem is due to some clash between them.

Adding to my answer from the comments above: titlesec's \titleformat option can deal with size and colour options. See pp. 3-4 of the titlesec manual.

\usepackage[compact]{titlesec}
\titlespacing{\section}{0pt}{*0}{*0}
\titlespacing{\subsection}{0pt}{*0}{*0}
\titlespacing{\subsubsection}{0pt}{*0}{*0}