I've seen many pages, including a text wrapping adsense-text-ads. Here's my structure: http://urbanguidebook.com/cities.php?city=16&vdid=32 Is it against TOS? I don't think because if it's also the text-wrapping text-ads should be against TOS.
You got me confused with all your "text-wrapping" I don't see anything wrong with your site TOS-wise.
Not adsense related, but anyway. Fix your css for #inner1 and #inner2. Menus are displaying outside of body template.