The problem with using height:100%
is that it will be 100% of the page instead of 100% of the window (as you would probably expect it to be). This will cause the problem that you're seeing, because the non-fixed content is long enough to include the fixed content with 100% height without requiring a scroll bar. The browser doesn't know/care that you can't actually scroll that bar down to see it
You can use fixed
to accomplish what you're trying to do.
.fixed-content { top: 0; bottom:0; position:fixed; overflow-y:scroll; overflow-x:hidden; }
This fork of your fiddle shows my fix: http://jsfiddle.net/strider820/84AsW/1/