I read the smarty manual and got it to work. Here is the code
{* CSS classes used in this template:
#menuwrapper - The id for the <div> that the menu is wrapped in. Sets the width, background etc. for the menu.
#primary-nav - The id for the <ul>
.menuparent - The class for each <li> that has children.
.menuactive - The class for each <li> that is active or is a parent (on any level) of a child that is active. *}
{if $count > 0}
<div id="menuwrapper">
<ul id="primary-nav">
{foreach from=$nodelist item=node name=foo}
{if $node->depth > $node->prevdepth}
{repeat string="<ul class='unli'>" times=$node->depth-$node->prevdepth}
{elseif $node->depth < $node->prevdepth}
{repeat string="</li></ul>" times=$node->prevdepth-$node->depth}
</li>
{elseif $node->index > 0}</li>
{/if}
{if $node->parent == true or ($node->current == true and $node->haschildren == true)}
<li class="menuactive menuparent">
<a class="menuactive menuparent" {elseif $node->current == true}
<li class="menuactive">
<a class="menuactive" {elseif $node->haschildren == true}
<li class="menuparent">
<a class="menuparent" {elseif $node->type == 'sectionheader'}
<li class="sectionheader"><span>{$node->menutext}</span> {elseif $node->type == 'separator'}
<li style="list-style-type: none;"> <hr class="separator" />{else}
<li>
<a {/if}
{if $node->type != 'sectionheader' and $node->type != 'separator'}
href="{$node->url}"><span>{$node->menutext}</span></a>
{if $smarty.foreach.foo.last == 0} |
{/if}
{elseif $node->type == 'sectionheader'}
><span>{$node->menutext}</span></a>
{/if}
{/foreach}
{repeat string="</li></ul>" times=$node->depth-1}
</li>
</ul>
<div class="clearb"></div>
</div>
{/if}
