Change the formatting of a label in Drupal 7
Something is odd about this as you say your labels are in lower case but they are being rendered in all caps.  I would view it with Firebug / Chrome Web Inspector to make sure there is not a higher level selector in your CSS that's transforming it to all caps in which case you would have a tough time going back to title case if your selector does not override the one thats making it all caps. 

At any rate you can't transform all caps back to titlecase but you could with jQuery:

https://stackoverflow.com/questions/3471157/css-text-transform-capitalize-on-all-caps

Also see this for reference, http://www.w3.org/TR/CSS21/text.html#propdef-text-transform

"capitalize 
Puts the first character of each word in uppercase; other characters are unaffected."


But before you go an add some JQuery, I would take a serious look at your CSS with Firebug to make absolute sure that something is not transforming it to all caps in the first place.