I think I fixed that whitespace issue by tweaking the bottom margin property:

 #dnnMenu .subLevel li{margin-bottom:-.5em; }

Yep, I have searched and searched and tried probably 100 different css scenarios and I STILL can't fix that "content behind" problem.  It would be great if someone from DNN would comment on this problem.  *hint hint*  :)

I have my doubts about the z-index property because I have experimented quite a bit with that.... also, if it was the z-index, then the submenu would be displaying behind the content.  I think it is something to do with the way IE handles the a:hover property inside a LI or something to do with IE not properly handling the DIV width:auto property.  (Especially since if you put in a fixed width, it works fine)

If it helps at all, here is a link to my StandardMenu css: http://dev.goodwillsew.com/Portals/_default/Skins/goodwillsewV2/DNNStandard/StandardMenu.css

Keep in mind that I customized mine a little for my specific menu design.  Also, I have reverted back to the fixed width solution (as originally posted) in order to have it work properly in IE.

The site I am working on, while in development, is available here: http://dev.goodwillsew.com