The type of menu you want can be found at
http://www.dynamicdrive.com. Just remember that these scripts are not always cross browser compatiable and you will still need standard text links for people who have javascript disabled or their browser does not support it. There is also a program by SoThink called DHTML Menues that will make the javascript for you and I have found this programs scripts to be very cross browser compatiable.
As for your questions.
1 - You do not have to use a trict doctype when using an external stylesheet, You can use any doctype.
2 - Not sure on that one.
3 - To add space to a HR try using inline CSS like <hr style="padding 5px;"> or if that doesn't work try margin instead of padding.