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The wiggling is cute at first, but I think a more straightforward method of highlighting would make it easier to find the active link.

I suspect one reason for the wiggle is that it's unlikely to collide with the site's native styling.

I actually think a better effect would be oscillating between growing and shrinking. Might not look right with links embedded in a paragraph, though.

Exactly, wiggling works well even for links that look like buttons, among other styles of links.

I played with growing and shrinking, but it looks bad because the text loses resolution as it becomes bigger (at least using CSS3 transforms).

I agree- perhaps a dimming highlight would be a bit nicer (background dims, except for a box around the selected link). Otherwise, great work.