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I like the idea of edit controls being extremely faint and low-contrast, to spring up on hover. That way, there's hints that there's functionality hiding there and does not interrupt the eye as it travels through the interface.

Otherwise, users who don't track their eye movement with their mouse might not find editing controls.

Agreed, if it's invisible, it won't be obvious that anything can be done. Also, I'm not sure that :hover is supported in all browsers. Might want to use something like jQuery to cover compatibility issues.
This technique would render your site unusable in mobile browsers, where it is unintuitive or impossible to hover a cursor.
Also it's terrible for accessibility.
Yay! Mystery meat! :-|
Only if it's used in a context that you wouldn't expect to have to edit. Here it seems like a logical approach.
ie6 doesn't support hover on anything other than anchors