Since you may be already using jQuery (most WP installations do), I edited their rotating-posts.js file.
Looked for the line (around line 42) :
document.getElementById('rp_post' + i).style.display = "block";
and replace it by :
jQuery('#rp_post' + i).fadeIn(400);
you may want to add a callback when the fade transition is finished (in my case I wanted to resize the parent container for my responsive layout) so you can do
jQuery('#rp_post' + i).fadeIn(400, function(){
// add your calback here
});
hope it helps