font-variant: small-caps; together with text-transform: lowercase;Foo
BAR
baz
Foo
BAR
baz
uppercase?Foo
BAR
baz

Apparently the text-transform: lowercase; is ignored by Internet Explorer.
What if we use scripting to apply both properties?
Test
Immediately the lowercase style is forgotten by IE.
Test
This changes the markup (through innerHTML) to lowercase, after which the font-variant is applied correctly. As ugly as IE! :)
Test
The last button adds the className small-first-letter to the element and then the following CSS is applied:
#test3.small-first-letter:first-letter { color: blue; font-size: 80%; }
The 80% is just a guess to play around with.