After lots of research I can find no solution to this that works in all browsers and doesn't require IE6 hacks.
The best solution is display:inline-block and IE6/7 and various other hacks (eg. FF2).
The final solution taken from here is as follows:
<style>
li {
width: 200px;
min-height: 250px;
border: 1px solid #000;
display: -moz-inline-stack;
display: inline-block;
vertical-align: top;
margin: 5px;
zoom: 1;
*display: inline;
_height: 250px;
}
</style>
<li>
<div>
<h4>This is awesome</h4>
<img src="http://farm4.static.flickr.com/3623/3279671785_d1f2e665b6_s.jpg"
alt="lobster" width="75" height="75"/>
</div>
</li>