This is an interesting question. It also goes with what to do with a mega menu and all its links. I've wondered whether the SE can understand that this is in fact a navigation (you would think they would) for internal links and not penalize your links in the body of the of the page.
According to Google's John Mueller when discussing about HTML5 he stated the following:
"In general, our crawlers are used to not being able to parse all HTML markup - be it from broken HTML, embedded XML content or from the new HTML5 tags. Our general strategy is to wait to see how content is marked up on the web in practice and to adapt to that ..." http://goo.gl/0YehV
You would then believe from that statement that the SE can differentiate navigation menus and drop down list from links in the body? I mean the SE must have crawled zillions of page and that would be a natural conclusion?
That being said I've use two strategies; the first embedding the select options in javascript... something like this
`**<script type="text/javascript">
/* ");
document.write("<option values=" ">Select a Property...<\/option>");
document.write("</option><optgroup label="Beach Estates">");</optgroup>**
document.write("<option value="\/alii-estate\/">Alii Estate<\/option>");** ......**
**......**</option>`
**This seems to work well.... but not sure if it is actually crawled**
The other strategy that I am more in favor with is to position the drop down list or navigation with a position:absolute; and
then place them physically at the bottom of the page ... this seems a better way, but it can affect the site links.
I've not done any real testing on this.
Burt Gordon