If you want to use that design, you will need to use images throughout, because there is no reliable way to display text like that.
(I'm not saying this is necessarily a good idea, but it is the best way I can think of to achieve the effect you're after)
The good news is that you can make part of an image into a image map, which allows you to select areas to use as links, meaning that you don't need to slice the original image, you can just leave it there intact.
For the hover effect, the best thing to do would probably be to make copies of the original image, highlight the item you want – on each copy, just do one item – and make the rest of the image transparent. Then you will have a series of images that you can overlay onto the original one, each one highlighting a different item. You can then apply these to area#item1:hover as appropriate.