Because Excel doesn't know what's happening. It's nuts that this functionality is in a printer driver: it should be the job of some higher-level print filter that any application or printer could share. That way "print preview" would have some hope of previewing what would actually be printed. But in the absence of such an architecture, what's happening is this:

• Excel thinks it's printing on 11x8.5 paper, and formats its output correspondingly. It sends this off to the printer driver.
• The printer driver, without telling Excel about it, takes these 11x8.5 pages, and rotates and scales them so they fit on half an 11x8.5 page each: a 8.5x5.5 page, in fact.
• The printer driver (probably) does this scaling in such a way as to preserve the aspect ratio of the document, otherwise people would moan that their circles printed out as ellipses.
• But because an 11x8.5 rectangle isn't the same shape -- the same ratio -- as an 8.5x5.5 rectangle, doing so necessarily introduces extra margins. 8.5x5.5 is much taller and thinner than 11x8.5, so you'll get huge margins at the top and bottom of the page (viewed when holding the booklet).

Perhaps what you should do, is tell Excel you're printing on custom-sized (8.5in by 5.5in) paper, but tell the printer driver you're printing on 11x8.5?

Peter