What version of Windows are you using? Sometimes the OS will force additional graphical quirks onto certain HTML elements. Things appear to behave as desired in Chrome 18 on Windows 7 with an Aero theme enabled. I actually answered a similar question yesterday with an example for styling select element to replace the graphical elements lost with -webkit-appearance: none: https://stackoverflow.com/a/10074928/1030243. Hopefully, if no other solution is found, you can implement it with a few extra lines of CSS.

set css outline property to none for dropdown...

select:focus  
{  
    outline: none;  
} 

I would recomand using a padding instead of margin... it will look better

select {        
  -moz-border-radius:8px; 
  border-radius: 8px;
  -webkit-border-radius: 5px; /*this one is more important than the moz one*/
  padding:9px;
}