Is there a better way to write this jQuery UI effect animation?
You could create a function that will set up the animation of text or color and then just call it a few times to set up your animation:

$.fn.animateIt = function(color, text) {
    var that = $(this);
    if (text) {
        that.queue(function(next) {
            that.text(text);
            next();
        });
    }
    if (color) {
        that.animate({
            color: color
        }, 500);
    }
    return that;
};

$textarea.animateIt('rgb(41, 41, 41)')
    .animateIt('#FFF', 'Please enter your reply here')
    .delay('1000')
    .animateIt('rgb(41, 41, 41)')
    .animateIt('#a7a7a7', body)
    .queue(function(next) {
        $textarea.focus().putCursorAtEnd();
        next();
    });


Gets rid of the nested functions.

http://jsfiddle.net/petersendidit/LYsQM/1/