Sorry to butt in but I was wondering if this was a weird jQuery bug so
looked in to it.  What I found was it appears the way you are changing
the className is the problem.  When I took out that part and replaced
it with addClass and removeClass it seemed better.  I took some
liberties with your code while testing but thought my test might be
useful to you.

http://www.exfer.net/test/jquery/hover_test.html

Of course this isn't a hover state system by any means but hopefully
can help you get past the current hurdle.

David

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