OK-I think I have a handle on what you're trying to do. Let me try to recap and see if I have this right:
1) To start you have a basic menu with 3 options.
2) When you click on an item a new menu appears (in the same place as the old one) with the original menu item now at the top and the sub options listed underneath.
3) Mousing over the suboptions causes each to glow (clicking takes you to the appropriate page I'm presuming).
The problem is:
The first suboption in the new menu is in the same position as the second option in the ORIGINAL menu.
When clicked, you are taken to the link attached to the second option on the ORIGINAL menu, rather than the suboption in the new menu.
Is that right?
The way I would set this up (in Dreamweaver) is as follows:
1) Create a layer for each menu version (one for the base menu and one each for each of the 3 submenus).
2) Within each layer setup your menus accordingly (whether you're using one graphic for the whole menu or tables with sliced graphics).
3) Now for the main menu, add a behavior for the first menu item that will turn off the base layer and turn on the layer containing the submenu for that item (when you click on it). You can either attach that behavior to the graphic (if it's sliced) or to an image map (if the menu is one single graphic).
4) Your new submenu should function OK now (you might have been having troubles before if your base layer was still turned on but hidden-I'm guessing the cursor saw two links and defaulted to the base layer)
5) Now, how to get the base layer back again? If your menu is one large graphic you can draw an image map over the whole graphic. Attach a behavior that says when you mouse out of that area, the submenu layer will turn off and the base layer will turn back on.
Alternatively (this is a little tidier), you can add another layer beneath the submenu layer (call it submenu map), and drop a clear gif image in the same size and position as the menu. Attach the "mouseout" behavior as in the previous paragraph (if you use this method be sure to turn the map layers on and off along with the submenu layers when they're to be activated).
Be sure to set up your page so the base menu layer is the only one visible when it loads.
I really hope that made sense, I know it is rather confusing (took me a while to wrestle through that when I had to do it). There may of course be more elegant solutions out there (but as a web buddy of mine once told me-the best solution is the one you get to work!).
As The Keeper said though, be mindful of page weight with all those layers and graphics. I would also throw in the usual caution about using Flash-don't do it unless you know your audience can see it. Just remember, if they don't have the plug-in they won't be able to see it-annoying if it's providing content, but disasterous if the Flash is providing your site navigation...
Good luck!