Incorrect behaviour is observed
The :hover pseudo class is only activated when either the border or the text is hovered over. It appears that IE8 isn't mapping the :hover pseudo class to the additional content height (and reduced width, in this case) created by specifying width and height values, nor to the padding value that has been specified.
In the example below, #main is the grandchild of the body element; incorrect behaviour is observed no matter what level div#main is nested at.