Plugins?

Hello Dolly shows lyrics on your admin interface, not on your blog.

No, it doesn’t. Apparently it is not entering the styling in the header. Are you using the most current version of the plugin (not that it probably matters)?
http://cvs.sourceforge.net/viewcvs.py/cafelog/wordpress/wp-content/plugins/
You can enter a section for hilite in your css while you track down why the filter is not working properly.
.hilite {color: #fff;background-color: #f93;}