CSS <ul> <li> gap in IE7

Question

I have a CSS <ul> <li> nested menu that works perfectly in IE 8 and firefox but in IE7 it produces a small gap between the elements. this is my CSS:

#nav, #nav ul
{
    margin: 0;
    padding: 0;
    list-style-type: none;
    list-style-position: outside;
    position:static;/*the key for ie7*/
    line-height: 1.5em;

}

#nav li
{
    float: inherit;
    position: relative;
    width: 12em;
}
#nav ul
{

    position: absolute;
    width: 12em;
    top: 1.5em;
    display: none;
    left: auto;

}
#nav a:link, #nav a:active, #nav a:visited
{

    display: block;
    padding: 0px 5px;
    border: 1px solid #258be8; /*#333;*/
    color: #fff;
    text-decoration: none;
    background-color: #258be8; /*#333;*/
}

#nav a:hover
{
    background-color: #fff;
    color: #333;

}
#nav ul li a
{
    display: block;
    top: -1.5em;
    position: relative;
    width: 100%;
    overflow: auto; /*force hasLayout in IE7 */
    right: 12em;
    padding:0.5em; 
}

#nav ul ul
{
    position: absolute;
}

#nav ul li ul
{
    right: 13em;
    margin: 0px 0 0 10px; 
    top: 0;
    position: absolute;
}

#nav li:hover ul ul, #nav li:hover ul ul ul, #nav li:hover ul ul ul ul
{
    display: none;
}
#nav li:hover ul, #nav li li:hover ul, #nav li li li:hover ul, #nav li li li li:hover ul
{
    display: block;
}

#nav li
{
background: url(~/Scripts/ourDDL/ddlArrow.gif) no-repeat center left;
}

#divHead, #featuresDivHead
{
    padding: 5px 10px;
    width: 12em;
    cursor: pointer;
    position: relative;
    background-color: #99ccFF;
    margin: 1px;
}
/* Holly Hack for IE \*/
* html #nav li { float: left; height: 1%; }
* html #nav li a { height: 1%; }
/* End */

and here is an example for a menu:

<ul id='nav'><li><a href="#">Bookstore Online</a></li>
    <li><a href="#">Study Resources</a></li>
    <li><a href="#">Service Information</a></li>
    <li><a href="#">TV Broadcast</a></li>
    <li><a href="#">Donations</a></li></ul>

Answer 1

I actually fixed it by setting vertical-align: bottom to LI elements (and yes, I didn't remove spaces and line breaks :)