I just finished up the preliminary work on a new site where the client wanted drop down menus and fancy image links for the top-level menu items. The requirements were to use the Drupal menu system to maintain permissions on the links, but also use stylized images for the main menu links. It took a bit of searching, but the solution was pretty elegant thanks to the Drupal community.
The drop downs were easy. I used the Nice Menus module for the first time and immediately fell in love with it. It provides up to 99 blocks to which you can assign Drupal menus. The menus can drop down or fly out, depending upon your design. Plus, you can stylize them to your hearts content to match your theme. So, the only real problem was how to use images for the top level menu.
There are apparently a few ways to solve this problem. My first attempt was to just use CSS to size the menu items, hide the menu text and place a background image for the element. This seemed to be the least obtrusive method for Drupal, but flaws emerged with compatibility and accessibility. Firefox seems to like color: transparent; but IE does not. They both seem to like text-indent: -1000px; but with either of these solutions the links completely disappear when you turn images off :(
Luckily, I stumbled upon this comment which details the use of theme_menu_item_link() to swap the menu title field with the description field and allow it to use HTML for display. After implementing the function in your template.php file, you can type your HTML img tag into the description field, and your hover text into the title field when creating a menu item.
Now, you have an accessibility friendly menu which uses Drupal permissions, image tags with alt text and an anchor tag with title text. You just have to do a little bit more CSS cleanup to get the drop downs to match your theme and you are golden!
Many thanks to the Drupal community on this one!!