I did a little test on the latest versions of Chrome, Opera, Firefox, IE and Safari; besides Opera*, the browsers seem to work as you would wish.
Opera doesn't, and that's due to faulty browser implementation, and should be filed as a bug. The specs are pretty clear on this point:
Also, the area outside the curve of the border edge does not accept pointer events on behalf of the element.
P.S. (The :hover is a pseudo-class, not a pseudo-element)
* When I originally made this post I tested the issue on the latest version of Opera on Linux which currently is 12.16. As King King pointed out below, this is not the latest version on other operating system, where the test works fine.