Update: I have made a greasemonkey script to optimize the Dropgadget Gadget UI for Gmail as well as improve the iGoogle interface.
It seems that Dropbox has updated their privacy settings on their site so that IE now will let users access the gadget using the default privacy settings. In Firefox, however, if you have deselected "Accept 3rd Party cookies" you need to add getdropbox.com to the exceptions list.
The V2 version of the gadget is available:
Download V2 My Dropbox Gadget
Thanks for all of your support and the for the mention from Lifehacker.
UPDATE: After the initial release of the gadget I did some more testing based on feedback that I received. In the end, there appears to have been two separate issues:
- The new iGoogle gadget.* API does not appear to be available for all users and browsers just yet. I switched back to the legacy API for all of the code.
- The cookies set by Dropbox are considered 3rd Party cookies and so they are blocked by the default cookie security rules in IE 7. These are usually blocked because of advertising servers, but there are "white hat" uses as well...such as the case with dropbox.
If you have not heard of it, Dropbox is a fantistic service for syncing files between computers and a central web repository. They are in beta but you can signup here. Here is a screencast they have that shows the tool in action:
Although you can sync multiple boxes, I only sync the service with 1 PC currently, but I use the web interface frequently and a common file backup and anywhere access solution.
The idea occurred to me to build a Google Gadget where I could have even easier access to my dropbox whereever I go, especially on the computers that I frequently use but do not want to install the client software. So, I created the My Dropbox Gadget.

I submitted it to the Google Gadget Directory and will update the link soon. In the meantime, you can download the Dropbox Gadget here.
Once I got that working, I found that the natural width of the dropbox table did not fit well with the standard module width for iGoogle, so I created a greasemonkey script that adjusts the table style so it alwasys fits the gadget with in iGoogle. you can download the Fix Dropbox Width script here.