Here is a temp work around for anyone that this is annoying--this should not be 
used as a permanent fix.
goto /usr/share/guake/guake.glade
Look for this line:
<widget class="GtkNotebook" id="notebook-teminals">
Under this widget class is a line that looks like this:
 <property name="padding">0</property>
Change the number, in my case to 23.  You may have to experiment with this 
number to get it just right.
Save file and restart guake.  This will lower the terminal down a few notches 
and make it viewable.

Hope that helps till someone figures out the real issue.

Take care.

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https://bugs.launchpad.net/bugs/747872

Title:
  Top panel in Natty sits over quake window

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