This is less of a specific problem or error but more of a implementation question.
First of I\'d like to say that I\'ve been through a lot of fading image tutorials
try to do it easy like this:
$('#img').hover( function() { $(this).stop().fadeIn(...).attr('src', 'image_o').fadeOut(...) }, function() { $(this).stop().fadeIn(...).attr('src', 'image').fadeOut(...) });