I found a bug in Chromium.
It seems that the engine renders transitions in some kind of special layer. Part of content which overflows over border-radius should be hidden, but it is not.
Look at this example: http://jsbin.com/nijavunoqe/1/edit?html,css,output
Hover mouse over color squares. You will notice that while animation corners are visible. And furthermore it affects neighbour element. Firefox and IE are ok.
So, the question is: Is it possible to find a way around this bug and get it to work as expected?
You can use this code in the mean time for chrome. Those transforms are broken as hell I've never even noticed.
Just note that I changed your .content to img. It didn't work straight off the bat with .container but I'm sure you can tweak it from here.