Can you not apply a "fade in" UMG Animation to a UMG Button?

Yes you can. Make an animation and trigger it the on hover state. The 4.11 has the on hover state if I am right. If your on a lower UE you can make it to by putting the button in a border containing widget and I think that it has the onhover event and from there you can include an animation that would make a transition from one image to other.