Is there a way to remove the entire navigation bar (the one with the tabs) and replace it with a custom horizontal menu? I'm still new with the smf css.

There is a code in the code index that will allow you to get rid of the tabs up there. There is not, however, a way to replace them with a menu, nor anything else. If ya check the source code you'll see that the html places those options in that exact spot, and they look like tabs as the css sets the background images/borders/font colors for those options.
You could use the code from the code index to remove them and make a menu of your own, placing it somewhere else, but you would have to put every single option on it and they would show to all members/including guests. Plus you would have to figure a way for them to logout. Possibly moose , omikron or someone else could help with that. (the logout part)
Other option, if you use the portal, would be there is a code for removing them only when you are at the portal.
They will show when you are at the forum itself. That way you could put the options on the portal.