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remove float:left from ul.menu-sidebar
on line 87 in custom.css, remove display:inline, and add float:left;
.menu-sidebar li{
float:left;
margin-right:15px; /* adds a little spacing between items */
}
and the lines above the menu items are coming from menu.css line 159:
.menu-sidebar li.level1 {
background: url(../images/menu_sidebar
}
the first one being removed on line 162:
.menu-sidebar li.level1:first-child {
background: none;
}