i have this functioning on my site using the fold page list plugin. but in effect im sure it works the same.
at the start of my list, after the <ul> i have placed `<?php
$pg_li="page_item";
if (is_home()) {$pg_li .=" current_page_item";}
?>`
this asigns the current page item the class current_page_item(!)
do this first then view your source, you should see that whichever page you are on now has this class, and all others have page_item.
now you need to assign the current_page_item class some css, i have had to include some !important tags to overrule some others, so that it functions how i wanted, in my case so that a parent page is highlighted when on that page, but any child pages remain unhighlighted. then when you click on a child page, this and only this page is highlighted, and the parent page returns to its normal colour.
the css i used is as follows
.current_page_item a {color: #ffffff !important; background: #B40000; }
.current_page_item ul li.page_item a {background: none; color: #50709A !important; } .current_page_item ul li.page_item a:hover {background: #B40000; color: #ffffff !important; }
this also includes some hover effects. you will need to change the colours to fit your theme.
hope this works for you both