Dynamic Menu Highlighting

if you use the Pages sidebar widget (that comes with wordpress) to display your menu, it already has a CSS class current_page_item, which you can use to achieve the same effect. You can access it like this in your CSS:

.widget_pages li.current_page_item a{
background-image:url(images/activelink.gif);
}

<ul id="menu"> 
         <!-- To show "current" on the home page --> 
       <li<?php                   if (is_home())
                  {    
            echo " id=\"current\"";  
              }?>>       
         <a href="<?php bloginfo('url') ?>">Home</a>   
     </li>       
   <!-- To show "current" on the Archive Page (a listing of all months and categories),
individual posts, but NOT individual posts in category 10 -->   
     <li<?php                   if (is_page('Archive') || is_single() && !in_category('10')) 
                 {   
              echo " id=\"current\"";                  }?>>  
              <a href="<?php bloginfo('url') ?>/archive">Archive</a>          </li> 
         <!-- To show "current" on any posts in category 10, called Design -->  
      <li<?php                  if (is_category('Design') || in_category('10') && !is_single()) 
               {                  echo " id=\"current\"";                   }?>> 
               <a href="<?php bloginfo('url') ?>/category/design">Design</a>          </li>
          <!-- To show "current" on the About Page --> 
       <li<?php                   if (is_page('About')) 
                {    
             echo " id=\"current\"";                  }?>> 
               <a href="<?php bloginfo('url') ?>/about">About</a> 
       </li>  </ul> 
#current
{
background-color: #336699;
}