Dan,
In Index Dot CSS (http://blooberry.com/indexdot/css/ -- my favorite reference), on the "general bugs" page, I find:
"- IE 3.0: It does not appear to cascade styles correctly."
Obviously, this part hasn't been updated in a while; but perhaps rendering nested styles correctly (which is what I'm assuming the above means) remains an IE problem?
Honestly, beyond a certain point, I've stopped trying to make things work with IE. But that may be eminently unhelpful to you. :)
-Vika