Hi TaranQ - have you tried rebooting your machine since this has been happening? That might be worth a try.
One other question - do you know if your machine was updated from IE6 to IE7 recently? If you have IE7, you might try pushing the IE "Reset" button - this is mentioned on this blog page: http://blogs.msdn.com/ie/archive/2006/06/12/628499.aspx - it is in IE under the Tools menu / Internet Options / Advanced Tab, then there is a Reset button at the bottom there.
> so I guess it's a video driver thing ?? (GeForce FX5200)
Actually this one is probably not due to video driver issues. MoI actually hosts a mini Internet Explorer panel to display the UI there, and something is not working right with IE on your system there. That's why an IE reset may help.
One other experiment you might try - after you click on the dropdown and get the dashed rectangle on it, try using Alt+down arrow on the keyboard and see if that opens up the dropdown or not. That is a keyboard shortcut for opening drop-downs, if that works then it narrows it down to something involving clicking rather than the drop-down itself being broken somehow...
- Michael
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