First I changed the #add click function of your jQuery script like this: [added css to the u286 id, then remove it later]
$('#add').click(function () {
    if ($('#sliding-form').is(":hidden")) {
        $('#sliding-form').slideDown('slow');
        $('#u286').css({
            'border':'1px solid #000',
            'border-bottom-color':'white'
        });
    } else {
        $('#sliding-form').slideUp('slow');
        $('#u286').removeAttr('style');
    }
});
EDIT: I changed a bit around in your css file. I overlaid the #bottom-header div on top of the #sliding-form div to make sure there is that white gap. Here is what I changed:
- Added - position: relative;to the- .containerclass,
 
- Added - #bottom-header {    position: absolute;    z-index:10;},
 
- Added - background:#fff;to- #u286,
 
- Removed - .mouseOver {background:#fff;}Since it doesn't affect anything,
 
- Changed - top: 30px;to- top: 26px;in- #sliding-form.
 
Hopefully this is more to your liking!
updated jsFiddle
Useful StackOverflow question / answer on overlays