Oh, a question? Umm.... what was that again?

Thank you for your curiousity about my idea.
Yes, you're both right. You have to accomodate users and designers. (Yes, I'm Canadian, why?)
1) You have to know your users and design accordingly. Personally, I try to keep in mind what a friend tells me.
"Hmm... its not very functional in Lynx...." or to be more explicit... why would you want to prevent any users from being able to access your site?
And being a public American group, you might want to remember the Accessiblity Act, eh?
Is your site usable by a blind user for instance? Get a screen reader, there's at least one with a timed-demo . Or a blind user. I had one try out my site. He said it worked great for him - and a relief not to have zillions of "image... image... image... image...image...
If most of your users will be using 800x600, great, design for that, but realize where it will break down. Content first, yes, but if you can't get to a menu, what difference does the content make? Menus that overlap like that make it hard to navigate, so function IS related.
Maybe consider doing a plain text banner menu ?2) Specifics
IE 6.0 on XP... the font size doesn't change when I try to switch to a bigger font, works fine with FF, but FF doesn't use the proper "absolute relative" sizes (...small, med, large...) but Normal, like you mentioned.
So not sure what's going on there, not sure what you're doing with the CSS, I'm assuming you've still got a 11pt in there. 11 is not bad for 800x600 I guess. But if you're careful, you should be able to manage making it relative. I used "medium" I believe, on this site
http://riversidebaptistchurch.ca/ and FF will scale it to any size. Now, admittedly, there's no graphic bullets or nested menus, but it works well, even with Netscape 4.7
The Nielsen stuff is good, but recall, a lot of that is older information. You'll also note that his site design could be called "minimalist". Content first, last, and menus in between

If you (or other readers) haven't heard there's a small movement to "under-designed" websites. Forgoing the flash, its about the content, and a design that is big enough and readable on any platform or browser. Web standards are fine as they go, but phones, PDAs and other small screens are making a wave too, and you never know when the lowest denominator may be important.
Frankly, while the colour contrast is interesting and grabs the attention easily enough, stripping off the coloured bullets would do nothing to hurt your site, and if doing that results in a menu that is scalable to any size, I'd do it in a second. If you want colour to contrast it, change the background of the menu box or something maybe?
Any more thoughts