Here is my quick attempt to reproduce the effect just with CSS2 and transparent PNGs:
http://alteredqualia.com/visualization/css2-spotlight.html
It's still a bit buggy around the edges, but it's much faster than CSS3 one.
Plus it works also in Opera (and probably could be forced to run in Explorer with a bit more care).
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Edit: fixed bugs around edges and made it work in Explorer 8 (which is surprisingly the fastest).
About performance: the biggest difference is in Firefox (standard release 3.6.3, no development HW accelerated builds).