I think this is what you need : http://jsfiddle.net/JnL33/7/
A slight modification was required in your jQuery code.
js:
$(document).ready(function(){
$('.menu > li').hover(function() {
$('.sub-menu').removeAttr('style').hide();
$(this).find('.sub-menu').fadeIn(400).css("z-index", "999");
}, function() {
$(this).find('.sub-menu').fadeOut(400, function(){
$(".current-menu-item").find('.sub-menu').fadeIn(400);
});
});
});