Okay, you're on the right path with the menu creation system in WP3, but here's some feedback:
The layout in the Admin/Super Admin section for creating the menus is much better than before. It makes much more sense and being able to see the tabs is good. However, each "tab" in the menu creation section should represent a tab in the navigation section of the blog, not the whole navigation section. I have two "tabs" and only one is showing on my WP3 test blog.
You need to have a radio button or something to select/click/turn on and take all the elements of an individual tab (such as all the categories, or the list of external links) and turn them into a drop down menu.
As an extension of this, it would be great to have the ability to create a menu tab (once again with the drop down option) that allows you to jump from whatever blog you are on to any other blog in the network. I know that not all multi-blog users would want this, but it suits my needs. My site is dedicated to the independent films I make and I want the production diary for each film I make to have its own theme and I would want visitors to my site to be able to jump from one blog to any other blog in the network they choose, preferably via drop down menu.
As an extension of the multi-blog navigation, what would be great is the ability to click on the Home tab to take a user back to the parent/main blog and have the next tab take you back to the landing page of the particular child blog your are on. So the menu tabs would read:
Home (tab 1) Current Child Blogname (tab 2)
(parent blog URL) (current child blog landing page url)