This is one of those awesome bugs that wasted more of my time than I’d like to admit, so hopefully this post can help someone in the future.
The problem: I’m working on a site that uses the jQuery Cycle plugin. The chunk that gets rotated for the slideshow is an HTML list-item that contains another list with nested list items. (li -> ul -> li, li, li). The root li kept getting a background color applied to it, even though I specified that it should be transparent.
The solution: disabling the Cycle plugin’s default behavior of applying a background to the slideshow container element when using IE on a Windows machine with cleartype enabled. Add this little combo to your Cycle options and things should be fine:
The key was mention of this undocumented feature in this thread.