I use divs or spans inside lists when we do fancy dropdown menus, using background gradients, rounded corners and dropshadows that all need to grow if the list grows. And even under xhtml-strict these validate. the trick is to have the div inside the <li> which is hovered. w3c validates this just fine.
e.g.
<li class="hasDropdown" id="mainNav_broadband"><a href="#" class="parent">Broadband Communications</a> <span class="dropdown-top"></span>
<div class="dropdown-wrapper">
<ul>
<li class="first hasDropdown secondary"><a href="#" class="secondaryParent">Broadband Comm 1</a>
<div class="dropdown-wrapper">
<ul>
<li><a href="#">Broadband Comm 1</a></li>
<li><a href="#">Broadband Comm 2</a></li>
<li><a href="#">Broadband Comm 3</a></li>
<li><a href="#">Broadband Comm 4</a></li>
</ul><!-- /second level dropdown-->
</div><!-- /dropdownwrapper-->
</li>
<li><a href="#">Broadband Comm 2</a></li>
<li><a href="#">Broadband Comm 3</a></li>
<li><a href="#">Broadband Comm 4</a></li>
</ul>
</div><!-- /.dropdown-wrapper -->
</li>
Anne Stahl
UI developer for Level Studios
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