Index: widgets.css
===================================================================
--- widgets.css	(revision 16)
+++ widgets.css	(working copy)
@@ -84,11 +84,11 @@
 }
 
 .placematt {
-	position: absolute;
 	cursor: default;
 	margin: 10px 0 0;
 	padding: 0;
 	width: 238px;
+	float:left;
 	background-color: #ffe;
 }
 
@@ -106,10 +106,11 @@
 	text-align: justify;
 }
 
+
 #palettediv {
 	border: 1px solid #bbb;
 	background-color: #f0f8ff;
-	height: 180px;
+	height:auto;
 	margin-top: 10px;
 }
 
Index: widgets.php
===================================================================
--- widgets.php	(revision 17)
+++ widgets.php	(working copy)
@@ -15,7 +15,12 @@
 	define( 'WP_WIDGETS_HEIGHT', 35 * ( count( $wp_registered_widgets ) ) );
 ?>
 	<link rel="stylesheet" href="widgets.css?version=<?php bloginfo('version'); ?>" type="text/css" />
+	<!--[if IE 7]>
 	<style type="text/css">
+	#palette {float:left;}
+	</style>
+	<![endif]-->
+	<style type="text/css">
 		.dropzone ul { height: <?php echo constant( 'WP_WIDGETS_HEIGHT' ); ?>px; }
 		#sbadmin #zones { width: <?php echo constant( 'WP_WIDGETS_WIDTH' ); ?>px; }
 	</style>
@@ -61,7 +66,8 @@
 		new Effect.Opacity('shadow', {to:0.0});
 		widgets.map(function(o) {o='widgetprefix-'+o; Position.absolutize(o); Position.relativize(o);} );
 		$A(Draggables.drags).map(function(o) {o.startDrag(null); o.finishDrag(null);});
-		for ( var n in Draggables.drags ) {
+		//for ( var n in Draggables.drags ) {
+		for ( n=0; n<=Draggables.drags.length; n++ ) {
 			if ( Draggables.drags[n].element.id == 'lastmodule' ) {
 				Draggables.drags[n].destroy();
 				break;
@@ -145,7 +151,7 @@
 			var pm = $(o+'placematt');
 			if ( $(o).childNodes.length == 0 ) {
 				pm.style.display = 'block';
-				Position.absolutize(o+'placematt');
+				//Position.absolutize(o+'placematt');
 			} else {
 				pm.style.display = 'none';
 			}
@@ -302,7 +308,7 @@
 				<div class="dropzone">
 					<h3><?php echo $sidebar['name']; ?></h3>
 
-					<div id="<?php echo $index; ?>placematt" class="module placematt">
+					<div id="<?php echo $index; ?>placematt" class="module placemat">
 						<span class="handle">
 							<h4><?php _e( 'Default Sidebar' ); ?></h4>
 							<?php _e( 'Your theme will display its usual sidebar when this box is empty. Dragging widgets into this box will replace the usual sidebar with your customized sidebar.' ); ?>