IE 8 IFrame Height Nesting Bug Demo
The two tables below are identical except for one attribute on the nested container div. All parent elements have both height and width defined in the same manner, either absolute (170px), or percentage based (100%). The container div on the left uses absolute width and percentage based height (width:170px; height:100%). This seems to cause the nested IFrame to ignore the percentage based height value. Just by setting the container div's width to percentage based (100%), the height of the Iframe correctly fills the parent element.
Note: These two tables look identical while using compatability mode, and every other browser I've tested.