I have a text field in a form, with autocomplete on. It works very well, but I cannot manage to find a way to highlight the letters in the suggested works. I found this hack in the autocomplete library (general, no Drupal related), but don't know if it applies or how to apply it. I would like the same effect:
Try Autocomplete Deluxe Module. May b this help you
Basically, I use the hook callback function mymodule_formName_autocomplete ($type, $text) and there I can do drupal_json_output($output_string) where $output_string, based on the string query $text accepts any HTML label, so I can highlight at convenience by just using PHP, which is very powerful.