Do you really have to ask? There is no actual content above the fold! Visitors will be out of there in no time. I would never link to a website that looks like that. If google complains (your question sounds like it), it is likely they feel something like that as well. You wrote Take that and act on it. I never put ads above the menu, internal navigation is more important then advertisement. I never put ads on a page in a way that hides the title and content from my visitors. In other words: put your visitors first if you want your website to actually be visited.
I agree with kh7. Making visitors scroll down to reach your content is a no-no. Rearrange your layout.
yeah, personally I think you might get better clicks/traffic if you place the ad block after the first paragraph or so of the content if they ads are relevant to the content the user may think it is a link that you are posting for them to read further. Try things out. You must be nimble
Maybe you could still have your add near the top but just a smaller one that wont force the latest post so far down, theres content there obviously, i think changing the current adsense add for a different size will be a start at least.