If you nail down any element to a fixed width, then the children of that element are sized in relation to their parent. So in your example a body of 700px will essentially force the site to be fixed, because your inner nav div, regardless of whether you call it 80% or 400px, is always going to be 80% of 700px, or 400px.
Now you can do it the other way around though. A floating width body can stretch with the page, while fixed width elements inside it stay the same width. See http://www.google.com/
for an example of such a page.