option menus appear behind flash objects in IE

In Internet Explorer - tested in IE8 - flash objects and other embedded content on a page appear above drop-down menus, such as Add and Tools, making it difficult to navigate or take actions on the document.

This is a longstanding IE issue (see Adobe KB about the problem and a solution) where flash content, as well as other embedded content, is rendered without observing the z-index values of other content on a page. Therefore, as can be seen from the attached screenshots, the drop-down menus will display behind flash content.

The suggested solution would be to add additional wmode parameters to the embed, as outlined in the "solution" link above. This would solve the problem if someone embeds a video that has been uploaded locally, using wiki markup such as:
!monkey_scream.mp4!

For example, the local video, monkey_scream.mp4, when uploaded and added to a page is embedded with the following code:
<div class="embeddedObject"><object width="480" height="380" type="application/octet-stream" data="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" codebase="https://www.apple.com/qtactivex/qtplugin.cab" classid="clsid:02BF25D5-8C17-4B23-BC80-D3488ABDDC6B"><param value="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" name="data"><param value="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" name="src"><param value="application/octet-stream" name="type"><embed width="480" height="380" type="application/octet-stream" src="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" pluginspage="https://www.apple.com/quicktime/download/"></object></div>

If we modify the above code by adding necessary wmode params it will look like this:
<div class="embeddedObject"><object width="480" height="380" type="application/octet-stream" data="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" codebase="https://www.apple.com/qtactivex/qtplugin.cab" classid="clsid:02BF25D5-8C17-4B23-BC80-D3488ABDDC6B"><param value="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" name="data"><param value="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" name="src"><param value="application/octet-stream" name="type"><param name="wmode" value="transparent"></param><embed width="480" height="380" type="application/octet-stream" src="/download/attachments/425996/monkey_scream.mp4?version=1&modificationDate=1291229830392" pluginspage="https://www.apple.com/quicktime/download/" wmode="transparent"></object></div>

However, this problem is compounded by the way we handle embeds of external content, using the Widget macro. This macro inserts an iframe of the embedded flash content, rather than inserting the flash object directly in the page. I'm not sure if an iframe is used for convenience or for some sort of XSS security protection. Either way, this creates a crappy user experience when doing something as common as embedding an external video.