StepMania already does this, and it's been an option for years. Of course it's rather unlikely that the person playing the song is going to use the lyrics, but sometimes people do watch you play (although I suppose that depends where you sit in your house), and popular songs do sometimes compel people to sing along.
Also, .lrc is the format used by StepMania as well, and it is a very simple format to use. I've actually written a good number of lyric files myself; you basically give a time cue for each line (it's capable of thousandth-of-a-second accuracy) and tell it what to display at that point. You can even code in a color to display the lyrics in if you so desire.
Let's not forget that if Peppy were to code it the right way, he could make it so lyrics display somewhere while listening to music on the main menu, or in the extended chat (somewhere where there's a bit of room, of course, although in the extended chat that might be a tall order), as time cues in .lrc files depend not on the notes but on the actual music file itself.
.lrc format supports per-word highlight, which I suppose, if you had the patience, could be used for per-syllable highlight.
Another idea would be, if you're beatmapping for an anime song, just stick in a video from a fansubbed version that comes with karaoke-style lyrics. I've also done that a whole bunch of times. That makes it so you don't have to do a .lrc file for that particular song (although in my experience, fansub lyrics are ocassionally a bit or more incorrect, so if you have any knowledge of the Japanese language, you may want to check the fansub's accuracy first).