By iteration is based on what Christopher did:
I think those tabs are more confusing than useful 
What do you want to do “Menu” or “Navigate”
And the blue border really needs more test, but my current impression is that is allow to focus on the area, … scrolling is more clear, … with the help of a real designer, adding some light shadow, can make it a good option. Especially on the inspector where every gray shade stack on layers when you option a Dropdown. It’s not a really common pattern, so can help us to shape the emotional part of our design.
Let’s continue the discussion about the Dropdown improvements in Improving dropdowns