IE7 z-index issue when menu wraps to multiple lines

We've been experiencing an issue in IE7 with Nice Menus when our menu wraps to two lines - drop-down sub-menus in the top line disappear behind behind the 2nd line (see screenshot for example).

I've seen a few issues about this but they mostly apply to Drupal 5 and couldn't be reproduced by the maintainer in core themes.

We have, however, been able to reproduce this in Garland using the latest version of Nice Menus:
1. Create a new Nice Menus block in Garland and assign it to the Header region
2. Set the Menu Parent to 'Administer' (in the 'Navigation' menu), Menu Depth to -1, and Menu Style to Down
3. Load the site in IE7 and resize the browser window so the menu wraps to two lines (you may need to remove any blocks from the two sidebar regions to do this)

You should see that when hovering over a drop-down list on the top line, the sub-menu appears behind the 2nd line as per the screenshot.

I'd love to know how to fix this, we seem to have tried everything. Would also be good to fix this in Nice Menus core as well.