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It is quite a nice theme. 7dana Web Design is the original author. You can download the theme (and many others) from the following link.
http://www.7dana.com/download/pafiledb.php?action=file&id=25The navigation system that particular theme uses is Javascript. If you open the theme.html you can see the code and all it's glory. The code is clean and easy to edit.
However, if you're not much of a coder, you can create a DHTML drop down menu that can easily be pasted into your site at
http://www.ecirce.com/dhtml/webmenus/. You'll need IE 5.5 to run the editor, but the resulting menus are cross-browser compatible.
One note though, the positioning of your menus is handled with offsets. In other words distance from top and left (x,y coordinates). You'll need to experiment with the offsets a little when you setup the menu. Also, you'll need to use the virtual URL (htt://www.yoursite/modules/newbb) instead of referencing <{$xoops_url}> with a target of _top or _self. Other than that, it's a straight forward WYSIWYG menu wizard.