yes once you hit the box the text fades to gray or if you hit the text the the text fades gray one or the other.
to be honest, i am using Dreamweaver CS3 but i've learned to actually code most of the stuff on my own now. Whenever i need help or want to quickly view my work i can. Is this a good or bad thing?
You will get purists here saying Dreamweaver is awful, but to be honest if you are happy using it, stick with it. Just use the "Split" design view and pay more attention to the Code than the design window. DW CS3 coding can end up including a load of superfluous stuff that doesn't result in a perfectly valid and well coded website but it's not as bad as a lot of folk will have you believe.

Are you using Spry for the nav bar?. You can set up the mouseover text colour change within your CSS using a:hover.