diff --git a/test/functional/abc-p2p-compactblocks.py b/test/functional/abc-p2p-compactblocks.py
--- a/test/functional/abc-p2p-compactblocks.py
+++ b/test/functional/abc-p2p-compactblocks.py
@@ -96,10 +96,6 @@
         self.nodes[0].setexcessiveblock(self.excessive_block_size)
         self.test.run()
 
-    def add_transactions_to_block(self, block, tx_list):
-        [tx.rehash() for tx in tx_list]
-        block.vtx.extend(tx_list)
-
     # this is a little handier to use than the version in blocktools.py
     def create_tx(self, spend_tx, n, value, script=CScript([OP_TRUE])):
         tx = create_transaction(spend_tx, n, b"", value, script)
@@ -127,7 +123,7 @@
             coinbase.rehash()
             block = create_block(base_block_hash, coinbase, block_time)
 
-            # Make sure we have plenty engough to spend going forward.
+            # Make sure we have plenty enough to spend going forward.
             spendable_outputs = deque([spend])
 
             def get_base_transaction():
@@ -135,11 +131,13 @@
                 tx = CTransaction()
                 # Spend from one of the spendable outputs
                 spend = spendable_outputs.popleft()
+                spend.tx.rehash()
                 tx.vin.append(CTxIn(COutPoint(spend.tx.sha256, spend.n)))
                 # Add spendable outputs
                 for i in range(4):
                     tx.vout.append(CTxOut(0, CScript([OP_TRUE])))
                     spendable_outputs.append(PreviousSpendableOutput(tx, i))
+                pad_tx(tx)
                 return tx
 
             tx = get_base_transaction()
@@ -158,51 +156,56 @@
                 CTxOut(0, CScript([random.randint(0, 256), OP_RETURN])))
 
             # Add the transaction to the block
-            self.add_transactions_to_block(block, [tx])
+            block.vtx.append(tx)
 
             # Add transaction until we reach the expected transaction count
-            for _ in range(extra_txns):
-                self.add_transactions_to_block(block, [get_base_transaction()])
+            block.vtx.extend([get_base_transaction()
+                              for _ in range(extra_txns)])
 
             # If we have a block size requirement, just fill
             # the block until we get there
             current_block_size = len(block.serialize())
+            overage_bytes = 0
             while current_block_size < block_size:
+                # Add padding to fill the block.
+                left_to_fill = block_size - current_block_size
+
                 # We will add a new transaction. That means the size of
                 # the field enumerating how many transaction go in the block
                 # may change.
                 current_block_size -= len(ser_compact_size(len(block.vtx)))
                 current_block_size += len(ser_compact_size(len(block.vtx) + 1))
+                left_to_fill = block_size - current_block_size
+
+                # Don't go over the 1 mb limit for a txn
+                if left_to_fill > 500000:
+                    # Make sure we eat up non-divisible by 100 amounts quickly
+                    # Also keep transaction less than 1 MB
+                    left_to_fill = 500000 + left_to_fill % 100
 
                 # Create the new transaction
                 tx = get_base_transaction()
-
-                # Add padding to fill the block.
-                script_length = block_size - current_block_size - base_tx_size
-                if script_length > 510000:
-                    if script_length < 1000000:
-                        # Make sure we don't find ourselves in a position where we
-                        # need to generate a transaction smaller than what we expected.
-                        script_length = script_length // 2
-                    else:
-                        script_length = 500000
-                script_output = CScript([b'\x00' * script_length])
-                tx.vout.append(CTxOut(0, script_output))
+                pad_tx(tx, left_to_fill - overage_bytes)
+                if len(tx.serialize()) + current_block_size > block_size:
+                    # Our padding was too big try again
+                    overage_bytes += 1
+                    continue
 
                 # Add the tx to the list of transactions to be included
                 # in the block.
-                self.add_transactions_to_block(block, [tx])
+                block.vtx.append(tx)
                 current_block_size += len(tx.serialize())
 
             # Now that we added a bunch of transaction, we need to recompute
             # the merkle root.
             make_conform_to_ctor(block)
-            block.hashMerkleRoot = block.calc_merkle_root()
 
-        # Check that the block size is what's expected
-        if block_size > 0:
-            assert_equal(len(block.serialize()), block_size)
+            # Check that the block size is what's expected
+            if block_size > 0:
+                assert len(block.serialize()) == block_size, "Block size wrong {} != {}".format(
+                    len(block.serialize()), block_size)
 
+        block.hashMerkleRoot = block.calc_merkle_root()
         # Do PoW, which is cheap on regnet
         block.solve()
         self.tip = block
@@ -238,23 +241,6 @@
         def tip(number):
             self.tip = self.blocks[number]
 
-        # adds transactions to the block and updates state
-        def update_block(block_number, new_transactions):
-            block = self.blocks[block_number]
-            self.add_transactions_to_block(block, new_transactions)
-            old_sha256 = block.sha256
-            make_conform_to_ctor(block)
-            block.hashMerkleRoot = block.calc_merkle_root()
-            block.solve()
-            # Update the internal state just like in next_block
-            self.tip = block
-            if block.sha256 != old_sha256:
-                self.block_heights[
-                    block.sha256] = self.block_heights[old_sha256]
-                del self.block_heights[old_sha256]
-            self.blocks[block_number] = block
-            return block
-
         # shorthand for functions
         block = self.next_block