first of all, it's just other users providing support here. you know, volunteers. this isn't paid support. can't really *expect* an answer, you can really only hope for one.
that said, I suspect no one else has seen this issue, which might be why no one has responded. I recommend you try a previous version.
and now I'll pass on my own observation. using 1.9.6, I'm finding that xhtml won't validate. A whole bunch of div tags are being added within the ul li structure, messing it up as far as xhtml validation goes. I reverted to 1.9.4, and it works correctly.
I'm not sure how to fill out a bug report for this, so if someonec can advise me, I would appreciate it.