I know its possible to integrate jQuery within Firefox addons, but are we able to manipulate (animate, move, adjust transparency, etc) XUL elements themselves?
From
XUL and HTML actually deal with opacity the exact same way, and it is jQuery that incorrectly detects what the browser can do. jQuery thinks it's in a different browser when it's living inside XUL, and so opacity effects are handled differently - by jQuery. Since it IS in Firefox, and it should deal with opacity normally, you can override this like so:
jQuery.support.opacity = true
Do this right after jQuery is loaded.
There is probably a whole category of similar fixes that can be post-applied to jQuery to make it behave better, but I haven't looked in to it.