Hey Jen,
Sorry to hear about your problems, many of us have struggled with that as well when dealing with clients who have a very specific look in mind, however it does cause a bit of a problem and not just for search engines.
Keep in mind that any time your pages change, the menu must be re-rendered. Right now it's rendered as HTML / CSS but to do it as an image would require a rendering program be built and while I don't know that much about .NET, I would assume that would take up alot of server resources. Also, your statement regarding search engine friendliness is not completely true, in this day and age it's all about making a page that renders correctly and that is semantic enough to be efficient when spidered by the search engines. This factor was one of the primary reasons the company I work for adopted DNN as it's primary CMS solution. Without S.E. friendliness, having a content-rich site is pretty useless.
However, as a solution to your problem (as I've had to do this a couple times myself) I would suggest creating the images in Photoshop and then making them part of the skin, static elements if you will. I also should be able to put in some basic .js rollover ability as well. However, you will have to change these manually when the page names / locations change. In situations like these I make up a seperate "template" file in Photoshop that has the proper dimensions setup so all I have to do is load it up, change the text and "Save for web..."
I've found myself doing this with not only image-based menus but for flash-based nav systems as well (our clients are very big on buying Flash templates and wanting us to make them work with DNN).