+1  A: 

I' am not sure how are you handling the repeater in your code behind, I used this repeater and the background did change while hovering the links:

<asp:Repeater runat="server" ID="rpt1">
    <ItemTemplate>
        <li>
        <a href="#" class="mySprite id<%# ((int)DataBinder.Eval(Container,"ItemIndex")) % 6 + 1%>">
        <font color="white"><%#Eval("Name")%></font><div>&nbsp;</div></a>
        </li>
    </ItemTemplate>
</asp:Repeater>

PS: I used the top most "CSS and Mark up" you posted and tested it on IE.

MK