If I have some HTML that looks like this:
This is some text that is being written with
a high
This will do what you want, and also preserve any tags within the .highlight span.
content = $(".highlight").contents();
$(".highlight").replaceWith(content);
it would be much easier to just change the class of the span than to actually remove it. You can use pure javascript:
document.getElementById("span id").className="";
Or jquery's toggleClass function:
$("element").toggleClass("highlight");
Also, best practices say that you shouldn't use class names that imply a style, like highlight. Try "emphasized" instead. :D