Hi,
Setting IgnoreParentClicks="true" on the Menu does appear to solve the problem.
Here's a full sample demonstrating the scenario. This was only tested with Ext.NET v1.x. The property may not be available on pre-v1 builds.
Example
<%@ Page Language="C#" %>
<%@ Register assembly="Ext.Net" namespace="Ext.Net" tagprefix="ext" %>
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head runat="server">
<title>Ext.NET Example</title>
</head>
<body>
<form runat="server">
<ext:ResourceManager runat="server" />
<ext:Panel runat="server" Title="Example" Height="215" Width="350">
<TopBar>
<ext:Toolbar runat="server">
<Items>
<ext:Button runat="server" Text="Button">
<Menu>
<ext:Menu runat="server" IgnoreParentClicks="true">
<Items>
<ext:MenuItem runat="server" Text="Item 1" />
<ext:MenuItem runat="server" Text="Item 2">
<Menu>
<ext:Menu runat="server">
<Items>
<ext:MenuItem runat="server" Text="Sub Item 1" />
<ext:MenuItem runat="server" Text="Sub Item 2" />
<ext:MenuItem runat="server" Text="Sub Item 3" />
</Items>
</ext:Menu>
</Menu>
</ext:MenuItem>
<ext:MenuItem runat="server" Text="Item 3" />
</Items>
</ext:Menu>
</Menu>
</ext:Button>
</Items>
</ext:Toolbar>
</TopBar>
</ext:Panel>
</form>
</body>
</html>
Hope this helps.