Temporary Solution...

1. Start IE7 using Start->Run iexplore.exe -nohome -extoff
2. Right click on the toolbar area and tick Menu Bar if its disabled
2. Tools->Options->Advanced->Security->Disable Phishing Filter

I tried with no luck a complete reinstall of IE7 followed by
reinstalling Microsoft Update 31768 but the update broke it again.

Nice one Microsoft. Breaking HTML CSS support in Outlook 2007 and now
breaking your own browser. What will you think of next?