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