Which skin did you start out with? There are many skins (most of them in fact) that have horizontal navigation, all you need to do is copy the SiteMenu code from the layout.master of one of those skins.
The "Understand the Layou.Master file" documentation provides all kinds of good information for modifying your layout.master. If you are wanting second-level pages to be in a horizontal menu, take a look at the the "Multiple Horizontal Menus" documentation.
The CSShandler is the result of the combining all the stylesheets, you can read about that in the Skin Changes documentation. Basically you need to set the CombineCSS key in your web.config or user.config to false.