It turns out there is a known IE7 (only) bug that occurs in some specific situations. One of them involves use of <em> (and few other inline tags) next to a floated element.
There is no real fix, but there are a couple of work arounds. Removing the <em> tag is one. Another for my situation is to add this to the style sheet.
em {zoom: 100%; overflow: hidden;}
This greatly reduced the occurrence of this bizarre bug, but not completely. Resizing the browser window will still cause the bug to come and go, but much less frequently.
I think this will suffice for now.
Keith it looks like you were on the right track.
It seems the path was completely unrelated to this behavior. I’m still curious about that question however.