Hi, IE6 won't let an absolute child use percentage heights unless the parent has a height set. There's no getting around that unless you want to cheat a bit 
You are only using 50% height but if you wnated to cover everything up you could set a height larger then you ever would need, and then hide the overflow with the parent 
Code:
*{margin:0;padding:0;}
body{color:black;background:white;font:4em/1 sans-serif;}
div.gray{position:relative;width:800px;background:gray;overflow:hidden;}
div.red{position:absolute;top:0;left:0;width:800px;height:999em;background:red;}
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