In IE6 in general, certain UI-elements are implemented with native controls. These controls are rendered in a completely separate phase (window?) and always appear above any other controls, regardless of z-index. Select-boxes are another such problematic control.
The only way to work-around this issue is to construct content which IE renders as a seperate "window" - i.e. you can place a selectbox over a textbox, or, more usefully, an iframe.
In short, you'll need to put "on-hover" like things such as menu's in an iframe in order to let IE place these above built-in UI controls.
This should have been fixed in IE7 (see http://blogs.msdn.com/ie/archive/2006/01/17/514076.aspx) but perhaps you're running in some kind of compatibility mode?