It would require some significant re-working, yes. Basically you would need to change all the instances of width:900px to something like width:99% in style.css. Beyond that, you would have to change the header graphics (since the header and footer sections currently have 1 big image per section). You would probably want to redo the images into tables, so you can get a fluid width.
Sure, that might be the better way to go. The code you are looking for resides in Multiflex's header.thtml and style.css files. In header.thtml copy:
Text Formatted Code
<!-- A.3 HEADER BOTTOM -->
<div class="header-bottom">
<!-- Navigation Level 2 (Drop-down menus) -->
<div class="nav2">
<!-- Navigation item -->
<ul>
<li><a href="{site_url}/">Home</a></li>
</ul>
<!-- Navigation item -->
<ul>
<li><a href="#">Static Menu 1<!--[if IE 7]><!--></a><!--<![endif]-->
<!--[if lte IE 6]><table><tr><td><![endif]-->
<ul>
<li><a href="#">Link 1</a></li>
<li><a href="#">Link 2</a></li>
</ul>
<!--[if lte IE 6]></td></tr></table></a><![endif]-->
</li>
</ul>
<!-- Navigation item -->
<ul>
<li><a href="#">Static Menu 2<!--[if IE 7]><!--></a><!--<![endif]-->
<!--[if lte IE 6]><table><tr><td><![endif]-->
<ul>
<li><a href="#">Link 1</a></li>
<li><a href="#">Link 2</a></li>
<li><a href="#">Link 3</a></li>
</ul>
<!--[if lte IE 6]></td></tr></table></a><![endif]-->
</li>
</ul>
</div>
</div>
Then in style.css you'll need to grab all the class="whatever" selectors as mentioned above, in addition to the menu css (everything that starts with .nav2).