You won't get penalized for doing that. Its a common enough practice that Google would shut down important sites if they started penalizing for it.
Be careful that you don't load too many links into your menus. I've seen 150 or 200 links in drop down menus. If that is your entire site, its fine. But if you have a larger site, you will have problems passing enough pagerank to other pages.
We recently AJAXed the menus on our site to hide the links from Googlebot. When somebody hovers over the top level link, AJAX loads the sub-menus. Not because we were worried about getting penalized, but because the sub-links contained a lot of non-SEO-important pages that were getting tons of pagerank.