The problem is in the position:absolute in the style of your div. If you remove that, your image will not hamper the navigation bar. The correct code for this page would be-
<html>
<head>
<style type="text/css">
#menu {
width: auto;
height: auto;
font-size: 16px;
font-family: Tahoma, Geneva, sans-serif;
font-weight: bold;
text-align: center;
text-shadow: 3px 2px 3px #333333;
background-color: #8AD9FF;
border-radius: 8px;
}
#menu ul {
height: auto;
padding: 8px 0px;
margin: 0px;
display: inline;
}
#menu li {
display: inline;
padding: 20px;
}
#menu a {
text-decoration: none;
color: #00F;
padding: 8px 8px 8px 8px;
}
#menu a:hover {
color: #F90;
background-color: #FFF;
}
</style>
</head>
<body>
<div id="menu">
<ul>
<li><a href="index.html">HOME</a></li>
<li><a href="aboutus.html">ABOUT US</a></li>
<li><a href="siteupdates.html">SITE UPDATES</a></li>
<li><a href="contactus.html">CONTACT US</a></li>
</ul>
</div>
<div style="z-index:0;left:0;top:0;width:100%;height:100%">
<img src="Unknown.png" style='width:100%;height:100%'/>
</div>
</body>
</html>