<p>We have a web application that uses SQL Server 2008 as the database. Our users are able to do full-text searches on particular columns in the database. SQL Server's full-text functionality does not seem to provide support for hit highlighting. Do we need to build this ourselves or is there perhaps some library or knowledge around on how to do this? </p>

<p>BTW the application is written in C# so a .Net solution would be ideal but not necessary as we could translate.</p>

You might be missing the point of the database in this instance.  Its job is to return the data to you that satisfies the conditions you gave it.  I think you will want to implement the highlighting probably using regex in your web control.
Here is something a quick search would reveal.
http://www.dotnetjunkies.com/PrintContent.aspx?type=article&id=195E323C-78F3-4884-A5AA-3A1081AC3B35