Interesting challenge. It appears that the option elements are not affected by z-index. There's quite a bit of chatter on the various forums about similar issues. The only thing I could come up with was an approach using jQuery to hide/show the select elmenent when hovering over the navigation menu.
thanks for your replay, I already tried that and it was working fine.
But in my case, its a dashboard application and it wont be user friendly because all select box generated dynamically. I am working on it, will let you know if i fix this