Hmmm, well, I'm not javascript expert, but I'd start by copying/pasting that javascript along with the ilayer and layer tags into my page (and the corresponding end tags for them). I'd spit that out just prior to spitting out the latest posts, just like he does:
HTML Code:
<div>Latest Posts</div>
<div stuff>
<div stuff>
<script... javascript> several lines </script>
<ilayer...>
<layer...>
all your posts in div tags or similar
</ilayer...>
</layer...>
<script> move javascript </script>
<a onmouseover link>
<script and move javascript>
</script>
</div>
</div>
I would grab all that code and put it in my page and see what happens. Of course, I'd do this on a test page so as not to screw up the main page.