It would help to see your issue as I would think its a style issue for sure with your style.
How we do the menu is like this with these classes based off the vb4 default styles drop down menu classes. If your custom style uses different style classes etc then you might get different results.
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I can only code based on the style released by vbulletin and that is the menu you see above. It is a white background with black writing and you hover over it the background turns yellow.