I have made a demo that seems to work for me in Chrome, Firefox, and IE7.
It works in IE8 +, because the -ms-filter rule is correct, however, opacity in IE7 is a filter:alpha(opacity=xx) rule, and the value must be between 0 and 100 . Your current value of .5 makes the swirl image almost completely opaque (and I'm not sure if it's even valid).
quirksmode has a good summary of various CSS opacity rules for IE.
Note. In your example structure, you are missing the <ul> or <ol> to <li> , which I added to the demo.
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