If you are using a domain that is mapped to 127.0.0.1 through the hosts file and it is not the default localhost, the HTC file will be blocked by IE for security reasons. So you cannot do it in that way.
You'd better test it online, or at least from your localhost server as some users also claim using the local file system does not work.
Also, don't forget to declare the DOCTYPE before your <html> tag at the top of your page, for example:
If you miss the DOCTYPE declaration, the menu will not work in IE.