your link to http://jsfiddle.net/3dX3T/2/ is fine just change the code to this:
just add opacity
.submenu {
margin-top: -96px;
transition: all 0.5s;
opacity: 0; // fade out the element
}
.dd:hover .submenu {
margin-top: 12px;
opacity: 1; // fade in the element
}