Internet Explorer 8 allows you customize the Toolbars, Favorites Bar and the Command Bar placement as per your liking. If you’re using a small monitor and want to gain more screen space when using Internet Explorer 8, here is a neat tip for you!
I use a 19" LCD monitor (Samsung 940BW), and screen real estate is never a problem for me. I know there are lot of people who still use 15" / 17" monitors with 800×600 or 1024×768 display resolution, needing more screen space during browsing or when using other applications.
Show Favorites Bar as Cascading menu
To gain more screen space in Internet Explorer 8, you can show Favorites Bar as a Cascading menu. Further more, you can move the Favorites button down to the same level as Tabs. Thereby you can eliminate one row in the Toolbar area.
Note: To customize the Toolbar placement, right-click on the Toolbar area in Internet Explorer and uncheck Lock the Toolbars. Click on the dotted handle on the left side of the toolbar, and drag it to where you want to put the toolbar. Once done, re-enable the Lock the Toolbars option.

Fig 1: IE8 toolbar before customization
After customization, here is how the Toolbar placement would look like:

Fig 2: After customization – Favorites Bar, Command Bar, Favorites Button in the same row
To gain further screen space, you can disable the Menu Bar. To do so, right-click on the Menu bar and uncheck Menu Bar. You can still have access to the Menu bar when needed by pressing the ALT key.
WebSlices & Feeds still work!
Good thing is that the WebSlices and Feeds still work after setting Favorites Bar as a drop-down menu. When you hover the mouse pointer over a WebSlice or Feed, it cascades automatically.

Fig 3: WebSlice added to Favorites Bar

Fig 4: Feeds added to Favorites Bar
You’d like to read the article Customize IE8 Beta 2 at The Windows Experience Blog for more customization ideas.
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Excellent tip and instructions! Works perfectly and provides much needed screen real estate. Thank you!