Without having the direct answer for you, the general cause of this sort of thing is that removing certain styles from one's skin.css doesn't always stop the items from being styled. The culprit is the default.css which has a bunch of dated looking styles in it. Any item not specifially restyled in your css will fall back on those styles.

The test is to delete the menu section from the default.css and reload the site. If this is the problem then put the styles back in place and then also copy them to your skin.css. The solution is then not to remove any styles, but to restyle them. For example, if there is a border="1" then set it to border="0".

Hope that helps,
Rob

Ok thanks guys. I finally found it!

But now I am having problems finding the reason that my vertical menu has unwanted spaces between menu items.

Anybody know where this is located in the below CSS?

body{ background:#000; height:100%; border-right-style: none; border-left-style: none; }
.controlpanel{ border:#ADADAD solid; border-width:0px 0px 2px; }
.controlpanel IMG{ margin:15px 5px 0px; }
.controlpanel TD TD TD TD IMG{ margin:0px; }
.controlpanel TD TD TD{ width:auto; }
.controlpanel DIV{ border:#CCC solid; border-width:0px 1px; width:3px; height:100px; }
.controlpanel TD.SubHead{ background:#CCC; font-size:12px; color:#000; font-weight:bold; }
.controlpanel TD TD TD .SubHead{ background:transparent; border:0px; font-size:11px; color:#333; font-weight:normal; }
.controlpanel TD TD TD input{ background:#EFEFEF; font-size:11px; color:#000; font-weight:bold; padding-left:4px; }
.controlpanel TD TD TD select{ background:#EFEFEF; font-size:11px; color:#333; }
.controlpanel A.CommandButton{ font-size:10px; text-decoration:none; }
.controlpanel A.CommandButton:link{ color:#000; }
.controlpanel A.CommandButton:visited{ color:#000; }
.controlpanel A.CommandButton:active{ color:#000; }
.controlpanel A.CommandButton:hover{ color:#F00; text-decoration:underline;}

.leftpane{ width:190px; padding:0px 0px 0px; }
.contentpane{ padding:1px 1px 1px 1px; background:url(media/bg_leftpane.png); background-repeat: repeat-x repeat-y;}
.rightpane{ padding:5px 5px 0px 0px; }
.leftcol{ background-color: transparent; background-repeat: repeat-y; border-top-color: #3f3b34; border-top-width: 3px; }
.leftbg{ background:url(media/bg_leftpane.png); background-repeat: repeat-y;}

.Head{ font-size:13px; font-weight:bold; color:#333; }
.SubHead,.SubSubHead{ font-size:11px; color:#333; }
.Normal{ font-size:11px; color:#333; }
.CommandButton,A.CommandButton:link,A.CommandButton:visited,A.CommandButton:active{ color:#FF7900; text-decoration:none; }
A.CommandButton:hover{ color:#FF7900; text-decoration:underline;}
TH,TD,DIV{ font-family:Verdana, Arial, Helvetica, sans-serif; font-size:11px; color:#333; }
A,A:link,A:visited,A:active{ color:#e2e0de; text-decoration:underline; }
A:hover{ color:#bfbebb; text-decoration:none; }
.user,a.user:link,a.user:active,a.user:visited,.user{ color:#c3c3c3; font-size: xx-small; text-align: right; text-decoration:none; }
a.user:hover{ color:#f0dc82; text-decoration:underline; }

.footer,a.footer:link,a.footer:active,a.footer:visited{ font-size:10px; color:#0f07f9; text-decoration:none; padding-right: 10px;}
a.footer:hover{ color:#777; text-decoration:underline; }
/*___________________________________________________________________________________________*/
.MainMenu_MenuContainer{ background:transparent; width:100%; height:1px; }
.MainMenu_MenuBar{}
.MainMenu_MenuIcon{ display:none; }
.MainMenu_MenuArrow{ display:none; }
.MainMenu_RootMenuArrow{ display:none; }
.MainMenu_MenuItem{ color:#333; font-size:11px; font-weight:normal; padding:3px; border-color: #CDB891; border-width: 1px; }
.submenuitemselected{ color:#000000; font-size:11px; font-weight:normal; background:#CDB891; border-color: #CDB891; border-width: 1px; }
.submenu{ color: #FFFFFF; padding:0; background:#CDB891; margin-left:-10px; border-color: #CDB891; border-width: 1px; }
.rootmenuitem TD{ text-align: center; color:#d1cbcb; font-size:11px; font-weight:bold; background:url(media/button.gif) no-repeat 15px; height:29px;}
.rootmenuitemselected TD,.rootmenuitembreadcrumb TD{
text-align: center;
 color:#f0dc82; font-size:11px; font-weight:bold;
 background:url(media/button_bread.gif) no-repeat 15px;
 height:29px;}