I have finally tracked down the problem with the toolbar image borders. It was because I had the .NET Framework 2.0 Beta installed. For some reason it was rendering the toolbar buttons with a style="border: 0px" instead of the border="0" attribute. This seemed to override the editor's .buttonover style.
I'm not sure what would cause this, but it may be something to look into before the final release of version 2 of the .NET framework.