I think the problem comes with the inner sep setting. Its definition in the pgfmanual is:
An additional (invisible) separation space of dimension will be added inside the shape, between the
text and the shape’s background path. The effect is as if you had added appropriate horizontal and
vertical skips at the beginning and end of the text to make it a bit “larger.”
For those familiar with css, this is the same as padding.
Some test code (commented): it contains some examples showing different values for some option you used.
\documentclass{article}
%\usepackage{xcolor} % no need: tikz loads xcolor
\usepackage{tikz}
\begin{document}
\begin{minipage}{0.45\textwidth}
\texttt{initial code}\\[1ex]
\texttt{no outer xsep}\\[1ex]
\texttt{no inner sep}\\[1ex]
\texttt{set 0pt to inner sep}\\[1ex]
\texttt{set 0pt only to inner xsep}\\[1ex]
\texttt{removing all spaces (sep)}\\[1ex]
\texttt{removing all spaces (xsep)}
\end{minipage}%
\begin{minipage}{0.55\textwidth}
VRCRCRCRCC \tikz[baseline] \node[fill=yellow!30, anchor=base,inner sep=0.7pt, outer xsep=-2pt] {ABCDE}; VBZBZBBBBG\\[1ex] %original code
VRCRCRCRCC \tikz[baseline] \node[fill=yellow!30, anchor=base,inner sep=0.7pt] {ABCDE}; VBZBZBBBBG\\[1ex] % without outer xsep
VRCRCRCRCC \tikz[baseline] \node[fill=yellow!30, anchor=base,outer xsep=-2pt] {ABCDE}; VBZBZBBBBG\\[1ex] % completely different: initially it's .333em much larger than your 0.7pt
VRCRCRCRCC \tikz[baseline] \node[fill=yellow!30, anchor=base,inner sep=0pt] {ABCDE}; VBZBZBBBBG\\[1ex] % so setting inner sep to 0pt removes completely the white space in both x,y directions
VRCRCRCRCC \tikz[baseline] \node[fill=yellow!30, anchor=base,inner xsep=0pt] {ABCDE}; VBZBZBBBBG\\[1ex] % removed just in x direction
VRCRCRCRCC\tikz[baseline] \node[fill=yellow!30, anchor=base,inner sep=0pt] {ABCDE};VBZBZBBBBG\\[1ex]
VRCRCRCRCC\tikz[baseline] \node[fill=yellow!30, anchor=base,inner xsep=0pt] {ABCDE};VBZBZBBBBG
\end{minipage}
\end{document}
The result:
