Hi,
I was able to get a couple of working examples put together using the sprite image I made earlier. It was pretty tricky with the list items overlapping each other on hover.
Ideally the best way to do this is to use an image replacement technique that allows the text to be visible for viewers with images turned off.
Nav Test #1 - Image Replacement Text
Due to the nature of the menu with the widths changing on hover and using negative margins I ran into the IE6/7 z-index bug. I had to set position:relative; on the parent LI to keep it visible with the negative margins but that tripped the bug. I’ll look into it some more later and see if I can find a workaround for it.
However I do have another version that works in all browsers but you will not get the replacement text if images are off. I went ahead and set up the sfhover script for IE6 in this one so the dropdown will work.
Nav Test #2 - No Image Replacement
Here is the code below in case those live examples get deleted and you need to refer back to it later.
Hope that helps 
Nav #1
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01//EN"
"http://www.w3.org/TR/html4/strict.dtd">
<html lang="en">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8">
<title>Nav Test #1 - Image Replacement Text</title>
<style type="text/css">
body {
margin:0;
padding:0;
font: 100%/1.4 arial,helvetica,sans-serif;
background:#FFF;
}
h1 {
font-size:1.6em;
margin:.5em 0 1em;
text-align:center;
}
/*==== Begin Nav Styles ====*/
#nav, #nav ul {
width:576px;
height:60px;
margin:0 auto;
padding:0;
list-style:none;
background:#000 url(sprite.png) no-repeat 0 0;
}
#nav li {
float:left;
position:relative;
}
#nav a {
float:left;
position:relative; /*set containing block for spans*/
height:60px;
text-decoration:none;
font:bold .9em/60px arial,helvetica,sans-serif;
text-align:center;
color:#FFF;
}
#nav a:active,
#nav a:focus,
#nav a:hover { /*style for images off */
color:#000;
background:#0F0;
text-decoration:underline;
cursor:pointer; /* IE6/7 need this */
}
/* all the anchor widths change on hover */
#home a {width:102px; z-index:6;}
#news a {width:75px; z-index:5;}
#service a {width:114px; z-index:4;}
#store a {width:85px; z-index:3;}
#network a {width:106px; z-index:2;}
#about a {width:94px; z-index:1;}
/* increase widths by 8px on hover */
#home a:hover {width:110px; margin-right:-8px;}
#news a:hover {width:83px; margin-right:-8px;}
#service a:hover {width:122px; margin-right:-8px;}
#store a:hover {width:93px; margin-right:-8px;}
#network a:hover {width:114px; margin-right:-8px;}
/*#about a:hover {width:102px; margin-right:-8px;} don't change the last one*/
#nav a span {
position:absolute;
top:0;
left:0;
width:100%;
height:60px;/*image height*/
font-size:0;
}
#home a span {background:url(sprite.png) no-repeat 0 0;}
#news a span {background:url(sprite.png) no-repeat -102px 0;}
#service a span {background:url(sprite.png) no-repeat -177px 0;}
#store a span {background:url(sprite.png) no-repeat -291px 0;}
#network a span {background:url(sprite.png) no-repeat -376px 0;}
#about a span {background:url(sprite.png) no-repeat -482px 0;}
#home a:hover span {
width:110px;
background-position:0 -60px;
}
#news a:hover span {
width:83px;
background-position:-102px -120px;
}
#service a:hover span {
width:122px;
background-position:-177px -180px;
}
#store a:hover span {
width:93px;
background-position:-291px -240px;
}
#network a:hover span {
width:114px;
background-position:-376px -300px;
}
#about a:hover span {
width:102px;
background-position:-482px -360px;
}
/*==== Dropdown Styles ====*/
#nav ul {
position:absolute;
top:60px;
left:20px;
width:140px;
height:auto;
margin:0 0 0 -999em;/*hide the dropdown*/
background-image:none;
background-color:#000;
}
#nav li:hover ul {
margin-left:0;/*reveal the dropdown*/
}
#nav li#network:hover span{ /*hold the BG image open on the sublist parent*/
width:114px;
margin-right:-8px;
background:url(sprite.png) no-repeat -376px -300px;
}
#nav li#network li a {
height:auto;
width:120px;
padding:2px 10px;
background:none;
color:#FFF;
text-align:left;
font:bold .9em/1.5 arial;
}
#nav li#network li a:hover {
background:#0F0;
color:#000;
text-decoration:none;
}
</style>
</head>
<body>
<h1>Nav Test #1 - Image Replacement Text <br>IE6/7 z-index bug</h1>
<ul id="nav">
<li id="home"><a href="#1">Home<span></span></a></li>
<li id="news"><a href="#2">News<span></span></a></li>
<li id="service"><a href="#3">Services<span></span></a></li>
<li id="store"><a href="#4">Store<span></span></a></li>
<li id="network"><a href="#5">Network<span></span></a>
<ul>
<li><a href="#">Forums</a></li>
<li><a href="#">Contacts</a></li>
</ul>
</li>
<li id="about"><a href="#6">About<span></span></a></li>
</ul>
</body>
</html>
Nav #2 (working in IE6/7)
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01//EN"
"http://www.w3.org/TR/html4/strict.dtd">
<html lang="en">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8">
<title>Nav Test #2 - No Image Replacement</title>
<style type="text/css">
body {
margin:0;
padding:0;
font: 100%/1.4 arial,helvetica,sans-serif;
background:#FFF;
}
h1 {
font-size:1.6em;
margin:.5em 0 1em;
text-align:center;
}
/*==== Begin Nav Styles ====*/
#nav, #nav ul {
width:576px;
height:60px;
margin:0 auto;
padding:0;
list-style:none;
background:#000 url(sprite.png) no-repeat 0 0;
}
#nav li {
float:left;
position:relative;
}
#nav a {
float:left;
position:relative;/*ie6*/
height:60px;
text-indent:-999em;/*hide text off screen*/
text-decoration:none;
}
/* all these widths will change on hover */
#home a {width:102px}
#news a {width:75px}
#service a {width:114px}
#store a {width:85px}
#network a {width:106px}
#about a {width:94px}
/*hide the images off left and position them on hover*/
#home a, #news a,
#service a, #store a,
#network a, #about a {
background:url(sprite.png) no-repeat -600px 0;
}
#home a:hover {
width:110px;
margin-right:-8px;
background-position:0 -60px;
}
#news a:hover {
width:83px;
margin-right:-8px;
background-position:-102px -120px;
}
#service a:hover {
width:122px;
margin-right:-8px;
background-position:-177px -180px;
}
#store a:hover {
width:93px;
margin-right:-8px;
background-position:-291px -240px;
}
#network a:hover {
width:114px;
margin-right:-8px;
background-position:-376px -300px;
}
#about a:hover {
background-position:-482px -360px;
}
/*==== Dropdown Styles ====*/
#nav ul {
position:absolute;
top:60px;
left:20px;
width:140px;
height:auto;
margin:0 0 0 -999em;/*hide the dropdown*/
background-image:none;
background-color:#000;
}
#nav li:hover ul,
#nav li.sfhover ul {
margin-left:0;/*reveal the dropdown*/
}
#nav li#network:hover,
#nav li#network.sfhover { /*hold the BG image open on the sublist parent*/
width:114px;
margin-right:-8px;
background:url(sprite.png) no-repeat -376px -300px;
}
#nav li#network li a {
height:auto;
width:120px;
padding:2px 10px;
background:none;
color:#FFF;
text-indent:0;
font:bold .95em/1.5 arial;
}
#nav li#network li a:hover {
background:#0F0;
color:#000;
}
</style>
<!--[if IE 6]>
<script type="text/javascript">// the Suckerfish script inserts class=sfhover on all li inside id=nav on mouseover
sfHover = function() {
var sfEls = document.getElementById("nav").getElementsByTagName("LI");
for (var i=0; i<sfEls.length; i++) {
sfEls[i].onmouseover=function() {
this.className+=" sfhover";
}
sfEls[i].onmouseout=function() {
this.className=this.className.replace(new RegExp(" sfhover\\\\b"), "");
}
}
}
if (window.attachEvent) window.attachEvent("onload", sfHover);
</script>
<![endif]-->
</head>
<body>
<h1>Nav Test #2 - No Image Replacement <br> works in IE6/7</h1>
<ul id="nav">
<li id="home"><a href="#1">Home</a></li>
<li id="news"><a href="#2">News</a></li>
<li id="service"><a href="#3">Services</a></li>
<li id="store"><a href="#4">Store</a></li>
<li id="network"><a href="#5">Network</a>
<ul>
<li><a href="#5-1">Forums</a></li>
<li><a href="#5-2">Contacts</a></li>
</ul>
</li>
<li id="about"><a href="#6">About</a></li>
</ul>
</body>
</html>