Apply all styling (background, border, block, width, height, etc.) to the a's instead of the li's. Leave the li's transparent/blank-style and use them only as containers.
EDIT: Also, don't think it's possible with the default list-style-position: inside bullets, only outside, or use "background: transparent url(/some/image.png) no-repeat scroll 0 0" on the a's with some padding-left to prevent overlap.