Its been a few hours now and I cannot figure out why there is a gap in my layout.
picture: 
http://dl.dropbox.com/u/4123377/gap.png
html: http://pastebin.com/7WktN5EA
css: http://pastebin.com/Fj8rukJ8
The button is "#login"
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The #login ul ul seems to be setting a top value of 50, which applies to the first element as well as all the others – so the first element seems to be causing the gap.
The right value is 40px – that will get rid of the gap and position the list like you want it.