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I liked the idea of this and it was quite timely for me as I was just about to apply this effect within my current project.
However as Simon stated playing around with the margin, padding and height values and getting it to work cross-browser was quite hit and miss.
So I ended up playing around a bit more, with absolute positioning, text-indent and an extra span I have a solution which, I think, is easier to implement.
I’ve explained my solution on my site and added a demo of the final result.
This works on Firefox 1.5, IE 5, 5.5, 6, NS 7.1 and Opera 8.5 on Windows. I haven’t had chance to test on a Mac yet.