who knows what evil lurks in the code of Dee? The DeathShadow Knows... 
Ok, joking aside. Semantically speaking the word "or" is not a list item! I would suggest including it in the button LI
Code:
<li><a class="button" href="' . BASE_URL . 'members/log_in.php?addComment=TRUE">Log In</a> or </li>
OR (pun!)
Generating it with CSS
Code:
ul.orList li+li :before{ content:" or "; }
if you are concerned about IElt8... there are also easy ways to make it support the :after pseudo element!
I just wanted to beat DS60 to this point 
As as far as the button displaying side by side. you ,button class is applied to the ANCHOR TAG. So since you have wraped each button in LI's they are no longer side by side.
you could give the button class to the LI and
Code:
.button a{
display:block;
width: auto;
margin: 2em 0 1em 0;
/* padding: 0.3em 2em 0em 2em; /**/
padding: 0em 2em 0 2em; /**/
border: 1px solid #326985;
font-family: inherit;
font-size: 12px;
text-align: center;
color: #FFF;
background: #3181bc url(/buttons/buttonGradientBlue.gif) repeat-x 0 0;
height: 29px;
line-height: 27px;
-webkit-border-radius: 3px;
-moz-border-radius: 3px;
border-radius: 3px;
text-decoration: none;
}
.button a:hover{
background-position: 0 -27px;
}
.button{display:inline-block;}/*Or you could use float:left..remembering to auto-clear the container UL with overflow:hidden!*/
OR BETTER STILL!
DONT give a class to anything in the list on the mark up... only the UL ( lets say class="orList" as before) and add this selectors to your CSS:
Code:
.orList a, .button{ ...}
.orList a:hover, .button:hover{...}
.orList li {display:inline-block;}/*Or you could use float:left..remembering to auto-clear the container UL with overflow:hidden!*/
This way if you have used the button class on anchors elsewhere on your site your style wont break.
Hope this helps
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