I have created a menu like yours and I'm not getting the same issue with the background hover image size. For me the backgrounds cover all of the text regardless of the size. I'm also not getting the same results in regards to the sub menus moving over. I can see this on your site with IE6, but not with the menu that I created.
What does the menu look like when you have it on a page by itself? if you can post back with a copy of the page that has the menu on it as well as a copy of your CSSMenuWriter folder. I will use your files to reproduce the results and look into it.