Sounds like something that will require actionscript.
onmouseover, you'll move the current image from layer order 2 to layer order 1, load the new image into layer order 2, with alpha 0, and then fade it in. Then on the next movement, you'll do the same.
I just did this script for the site www.lavishliving.com - which does something similar (rotates images on the homepage).
Frame 1:
Code:
_root.attachMovie("title", "title", 1000000000);
var images = ['mansion', 'aircraft', 'limo', 'yacht', 'massage'];
var i = -1;
var d = 1;
Frame 2:
Code:
i++;
d++;
if (i >= images.length) i = 0;
_root.attachMovie(images[i], images[i], d);
var r = i - 2;
if (r < 0) r = r + images.length;
_root[images[r]].removeMovieClip();
_root[images[i]]._x = 540;
_root[images[i]]._y = 200;
_root[images[i]]._alpha = 0;
Frame 3:
Code:
var x = _root[images[i]]._x;
if (x <= 482) gotoAndPlay(2);
_root[images[i]]._x--;
var a = _root[images[i]]._alpha;
if (a < 100) _root[images[i]]._alpha = a + 10;
Frame 4:
I also created objects holding the images with the linkage names 'mansion', 'aircraft', etc., to be referenced by the script.