Yep, just tried it, that's EXACTLY why you're having problems, compatibility view is on. Turn it off.
Turning off compatability mode fixed the menu issue. I think I turned that on some time ago to try to manage the problem of the screen jumping around when I hit the bottom of a text box.
I'm still having the problem of having to click the [more] smilies button twice to get the screen to pop up, but that's a problem for another day.
