Hmmm? Quite a mess you created.
OK the attached works.
Here's what I did.
I am not sure how you went about this but the process is much simpler.
Create and group one button (Home in this case).
Copy the group, select the MouseOver layer and Paste in Place. At this point you have only two buttons, a MouseOff and a MouseOver.
With both button state layers visible, marquee select both buttons. The status bar will show two groups on two layers selected.
From the
Arrange menu, select
Apply Soft Group. Now you have one button with a MouseOff and MouseOver state.
With this soft group selected, NOW select the
Create Nav Bar tool.
Check
Adjust Button Widths to Labels. Un-check
All Buttons the Same Width.
Check
Site Navigation Bar (this adds the navigation bar to all pages you have created).
I added
6 pixels Button Spacing.
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