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Netscape Navigator 4 uses separate documents for each layer. Therefore each form field you attempt to place in a layer meust be encapsulated within its own form tags, otherwise it will not render correctly.
Try using:
<html>
<head>
<script language="JavaScript"><!--
function updateLayer(object, text) {
if (document.getElementById)
document.getElementById(object).innerHTML = text;
else if (document.all)
document.all[object].innerHTML = text;
else if (document.layers && document.layers[object]) {
document.layers[object].document.open();
document.layers[object].document.write(text);
document.layers[object].document.close();
}
}
//--></script>
</head>
<body onLoad="updateLayer('myLayer', '<form><input type=\'text\'></form>')">
<div id="myLayer" style="position: absolute">
</div>
</body>
</html>