The <body> still needs margin:0 set. The user agent stylesheet still sets a margin for <body> by default.
Also, the #top-nav by default (a <ul>) has top margin(and bottom) applied. Remove those margins.
Edit-Seems you have this rule set.
Code:
#top-nav, #top-nav ul {
padding: 0;
list-style: none;
margin-bottom: 10px;
}
You set the bottom margin but the top margin still has some margins set by default.
To fix the alignment issue, you should know that margin:0 auto centering trick (on #top-navigation) doesn't work when the item is floated. Just static blocks. Remove the float:right on #top-navigation and give it overflow:hidden; instead (to contain the floated menu items)
Off Topic:
I don't see where you removed hte 960px width (on what??). Not that it matters. The resolution had nothing to do with whatever element you removed the width on
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