Try giving the menu/slideshow a position:relative and lower z-index. It looks like nivo slider has position absolute, but no z-index. I think if you define a z-index to those other elements, it should work for you in IE.
Explanation: the image is wrapped in #header — which has a height of 100px so it cuts off the bottom of the image. No matter what Z-index you give the #header, it will never show anything other than the top 100 pixels of the image.
So, you need to give the #header overflow:hidden;, and it will show the rest of the image. But ah, it’ll still won’t show because there is still position:relative; on the #header — so that’s why you need to remove that.
Then to make the image itself overlap the menu, you assign that relative positioning (and the Z-index) to the image.