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I see the problem when looking at your site in IE 7.0.6000.16609
I don't get that problem on my site, but your thumbnails are set larger than mine (mine are 100px)
In Blocks Admin, what size do you have "Height of display area in px:" set to for the Scrolling Thumbnails block?
Mine is set to 100, i.e. the same size as the largest dimension of my thumbnails. Is yours set like this?
Is the width of the left-column (where the block is positioned) wide enough to accommodate the thumbnails?
What happens if, as a quick test, you put the Scrolling Thumbnails block somewhere else on your site, e.g. one of the centre-block positions?
[Edit]
PS: The link in your sig points to server directories rather than a website