The scroll bar is there because the contents of the iframe in IE extend below the height of the iframe. Instead of a percentage try a hard number.
<iframe frameborder="0" width="100%" height="700" src="<?php echo $CONFIG['baseURL'].$key.'/?cloaked=true'; ?>"></iframe>
As well you could turn the scroll bars off
<iframe frameborder="0" width="100%" height="700" scrolling="no" src="<?php echo $CONFIG['baseURL'].$key.'/?cloaked=true'; ?>"></iframe>
Of course turning the scroll bars off in an iframe may cause some content to become unviewable if it extends below the height of the iframe.