CSS Issue with IE, Please Help

Check out the “What’s New” dropdown menu in Internet Explorer and you’ll see how it’s all messed up.

not quite sure what you mean with ‘messed up’ – it drops down nicely, but you can’t get to it.
btw, i see the same behaviour in IE7 and FF3.6

apart from
http://validator.w3.org/check?uri=http%3A%2F%2Ftinyurl.com%2F3bld2jz&charset=%28detect+automatically%29&doctype=Inline&group=0

http://codex.wordpress.org/Validating_a_Website

‘whats new’ does not have the image link – compare:

link8 ‘gift shop’:
<li class="dir" id="menu8"> <a href="/gift-shop/"><img src="/images/gift_menu.png" alt="" /></a>

link9 ‘whats new’:
<li class="dir" id="menu9"><img src="/images/new_menu.png" alt="" /></a>