In IE7 and below a stacking context created by a positioned element (position:relative in this case) is atomic and the children cannot overlap elements later in the html of the same (or higher) z-index. IE7 and below incorrectly assign a z-index of zero to positioned elements instead of the auto that the specs define.
This means that your absolute child element is hidden by the elements that follow the div in question.
You would need to raise the z-index of the parent to see the whole div.
<div class="Section[B] test[/B]">
<div class="MenuList" style="visibility:visible;" id="theLayer"><a href="#" style="float:right" onClick="hideMe();return false">X</a>Testing </div>