that's because the alert dialog's layout contains a container that puts your view inside it, so what you do is just adding an empty view that takes space. try to change its color to red, and you will notice it's just below the text and above the buttons.
in order to change the style of the dialog, you should, well change its style. here's a nice library that demonstrates how to do it, using the basic holo style. you can also use the one that is shown on HoloEverywhere library.
of course, if you don't want to support old devices (but according to the minSdk, you do), you can directly change the style and set a theme for the app itself, which will change the dialogs style on the entire app.
Not only that, but you don't even have to use AlertDialog. you can create your own dialogs instead.