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I think this shows it pretty clearly. The key thing is that we need the dropdowns to have a higher z-index compared with the top level nav so that Tracy panels can be above the main nav, but below the dropdowns because at the moment you can lose access to the panel's header bar making it hard to move/close.
On the old theme, setting Tracy's panels to 100 worked because the main nav was 0 or 1 (I think) and the dropdowns were 200.
