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I like the highlight function â€“ I think it really enhances the relationship of the label and control.
I would, however, be concerned about the usability of the focus behaviour â€“ really does seem to result in an unexpected user experience and takes one level of control (the click) out of the hands of the user. Those without great control of the mouse might find it difficult to select the correct control, accidentally selecting ajacent form fields.
But definitely an interesting approach to revealing functionality.