[SOLVED] Padding does not seem to be working

[DesignshopCSS]

Hi CSSERS,

I have a problem with a file.
here is a video link to explain it:
http://www.designshoptoronto.com/Diddley/CSS.mov

and some links to the css:
http://www.designshoptoronto.com/Diddley/style.css

and html files:
http://www.designshoptoronto.com/Diddley/test2.html

Does any body know what I am doing wrong?
Please help when you get a chance.

Thanks,
Tracey