In regard to the first issue, you are correct, it is an IE issue but sometimes we could over come this issue by adding a zoom property or a position relative to the menu. 
Since javascript is used to display and hide the flyout menu, why not provide a setting to set the number of miliseconds (or seconds) before the change (e.g. onMouseOut do a function that waits x miliseconds before hiding).
I have not delved into the extension that much, so I am making some assumptions here.
UPDATE: I just tested and padding the sub-menu instead of providing a margin still creates the space, but as far as the browser is concerned, the mouse is still over the element so the fly-out menu stays open.
In regard to the second issue, i was not able to reproduce it. I attached a screen shot of the left menu being expanded all the way.Once you have a live page up and running, please send me a link to further look into these issue.

Well I might be able to provide you a zip of the files. Here is a screen shot:
Did you examine the third question?
Lastly, when I selected in the theme Design => Current => Entire Navigation Route, all my menu options were displayed in their hover configuration on the home page. 
Here is a screenshot:
(Note: I reset the left column to a fixed height.)


