Prueba asi el codigo:
Código PHP:
<html>
<head>
<title>Documento sin título</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<? mysql_connect("localhost", "user", "pass")
or die("Could not connect to database.");
mysql_select_db("coveca_gob_mx") or
die("Cannot select database");
$result = mysql_query("select distinct producto from catalogo") or die( mysql_error() );
echo "<form name='form1' method='post' action='drop2.php'><select name='producto' size='1'>";
while ($row = mysql_fetch_array($result))
{
echo "<option selected>$row['producto']</option>";
}
echo "</form>";
?>
</body>
</html>
saludos