I dont think this is the z-index issue, looking at the source of the menu css, there is still no height or width specified for the menu items, IE 7 does not work correctly if there is no height or width specified. For IE7, there must be a height and width set for the menu items.
for the z-index, you need to specify the position as well, each position has a separate stacking order, so when setting the stacking order using z-index, you need to specify which layer the z-index is to be applied to.
ul#cssmw {
cursor: default;
list-style-type: none;
margin:0;
padding:0;
z-index:5000;
position: relative;
}