I actually have exactly the same problem.
Not afraid of admitting my knowledge of javascript is limited at best - perhaps here lies the issue!
Please see the top article:
tinyurl.com/3ay3lha
Anyway, at an attempt to solve this issue I must ask:
Do I need to call the mootools library, or any other in my template index.php?
Is there any other reason why this plugin would fail to work?
Could TinyMCE 2.0 be disturbing the code by placing <p> tags over <div>'s? I've tried switching to HTML view and saving but it seems to persist in adding them.
I place the code like this in my article:
blah blah blah
{showhide1 }
blah blah
{/showhide1}
Thanks in advance for your help - I'll be very sad if I can't have your plugin integrated into my site.