Refactored the coffeescript behavior so it is a bit more testable.

common/lib/xmodule/xmodule/css/annotatable/display.scss

@@ -60,4 +60,8 @@ span.annotatable {
     right: 8px;
     margin-top: 4px;
   }
+  
+  &.opaque {
+    opacity: 0.4;
+  }
 }

common/lib/xmodule/xmodule/js/src/annotatable/display.coffee

 class @Annotatable
     @_debug: true
+
+    wrapperSelector: '.annotatable-wrapper'
+    spanSelector: 'span.annotatable[data-span-id]'
+    discussionSelector: '.annotatable-discussion[data-discussion-id]'
+ 
     constructor: (el) ->
         console.log 'loaded Annotatable' if @_debug
         @el = el
-        @spandata = $('.annotatable-wrapper', @el).data "spans" 
-        @initSpans()
-
-    initSpans: () ->
-        selector = 'span.annotatable[data-span-id]'
-        $(@el).find(selector).on 'click', (e) => 
-            @onClickSpan.call this, e
-
-    onClickSpan: (e) ->
-            span_id = e.target.getAttribute('data-span-id')
-            discussion_id = @spandata[span_id]
-            selector = '.annotatable-discussion[data-discussion-id="'+discussion_id+'"]';
-            $discussion = $(selector, @el)
-            padding = 20
-            top = $discussion.offset().top - padding
-            highlighted = false
-            complete = () ->
-                if !highlighted
-                    $discussion.effect('highlight', {}, 1000)
-                    highlighted = true
-
-            $('html, body').animate({ 
-                scrollTop: top,
-            }, 1000, 'swing', complete)
+        @init()
+
+    init: () ->
+        @loadSpanData()
+        @initEvents()
+
+    initEvents: () ->
+        $(@wrapperSelector, @el).delegate(@spanSelector, {
+            'click': @_bind @onSpanEvent @onClickSpan
+            'mouseenter': @_bind @onSpanEvent @onEnterSpan
+            'mouseleave': @_bind @onSpanEvent @onLeaveSpan
+        })
+
+    loadSpanData: () ->
+        @spandata = $(@wrapperSelector, @el).data('spans')
+        
+    getDiscussionId: (span_id) ->
+        @spandata[span_id]
+        
+    getDiscussionEl: (discussion_id) ->
+        $(@discussionSelector, @el).filter('[data-discussion-id="'+discussion_id+'"]')
+
+    onSpanEvent: (fn) ->
+        (e) =>
+          span_id = e.target.getAttribute('data-span-id')
+          discussion_id = @getDiscussionId(span_id)
+          span = {
+            id: span_id, 
+            el: e.target 
+          }
+          discussion = { 
+              id: discussion_id, 
+              el: @getDiscussionEl(discussion_id)
+          }
+          fn.call this, span, discussion
+
+    onClickSpan: (span, discussion) ->
+        @scrollToDiscussion(discussion.el)
+        
+    onEnterSpan: (span, discussion) ->
+        $(@discussionSelector, @el).not(discussion.el).toggleClass('opaque', true)
+    
+    onLeaveSpan: (span, discussion) ->
+        $(@discussionSelector, @el).not(discussion.el).toggleClass('opaque', false)
+
+    scrollToDiscussion: (el) ->
+        complete = @makeHighlighter(el)
+        top = el.offset().top - 20 # with some padding
+
+        $('html, body').animate({ scrollTop: top }, 750, 'swing', complete)
+    
+    makeHighlighter: (el) ->
+        return @_once -> el.effect('highlight', {}, 750)
+            
+    _once: (fn) ->
+        done = false
+        return => 
+            fn.call this unless done
+            done = true
+
+    _bind: (fn) ->
+        return => fn.apply(this, arguments)

lms/templates/annotatable.html

-<div class="annotatable-wrapper" id="${element_id}">
+<div class="annotatable-wrapper" id="${element_id}-wrapper">
 
 <div class="annotatable-header">
 	<div class="help-icon"></div>
@@ -14,9 +14,7 @@
 	
 <script>
 $(function() {
-	// TODO pass spans to module directly
-	var el = $('#${element_id}.annotatable-wrapper');
-	el.data('spans', ${json_discussion_for});
+	$('#${element_id}-wrapper').data('spans', ${json_discussion_for});
 });
 </script>