Try it like this
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1" />
<title>Bug ridden crash prone thingy-ma-bober</title>
<style>
#nav{
padding:0px 2px 2px 2px;
margin:0;
width:165px;
background:#00037F;
list-style:none;
}
#nav a {
display:block;
border-top:1px solid #F5EA8F;
font-family:Arial, Helvetica, sans-serif;
text-decoration:none;
font-weight:bold;
font-size:13px;
color:#F5EA8F;
background:#00037F;
width:100%;
padding:2px 0;
}
#nav a:hover {
color:#00037F;
background-color:#F5EA8F;
}
* html #nav a, * html #nav li {
height:1%;
float:left;
}
</style>
</head>
<body>
<ul id="nav">
<li><a href="#">Link 1</a></li>
<li><a href="#">Link 1</a></li>
<li><a href="#">Menu 1</a></li>
<li><a href="#">Menu 2</a></li>
<li><a href="#">Link 2</a></li>
<li><a href="#">Link 3</a></li>
<li><a href="#">Link 4</a></li>
<li><a href="#">Menu 3</a></li>
<li><a href="#">Link 5</a></li>
<li><a href="#">Link 6</a></li>
<li><a href="#">Link 7</a></li>
</ul>
</body>
</html>
Its a lot cleaner and more semanticaly than the way you were doing it.