To fix the submenu gap you need to alter the first rule in the superfish.css file so that it looks like this:

.sf-menu, .sf-menu * {
   margin:0;
   padding:0;
   list-style:none;
   vertical-align: bottom; /* GAP FIX */
}

To fix the hover issue you need to eliminate the positioning from the container div that you have the navigation in. There is some IE bug with lots of relatively positioned divs that is messing it up.

I removed

position: relative;

from my css and now everything works properly. This is my code in my header.php theme file:

<div id="navigation">
      <?php $a = new Area('Navigation Area');$a->display($c);?>
</div>

And here is my CSS:

#navigation {
   border: 1px solid #CCC;
   width: 884px;
   height: 28px;
   margin: 10px;
   padding: 0 0 0 72px;
   float: left;
   clear: both;
   overflow: visible;
   color: #680B15;
   font-weight: bold;
}

Stupid IE!