IDs should not start with numbers...
$('#two').slideUp(500, function () {
    $('#four').after(this);
    $(this).slideDown(500);
});
Here is a demo: http://jsfiddle.net/jasper/8JFBA/
Or if you always want to add the element to the end:
$('#two').slideUp(500, function () {
    $('ul').append(this);
    $(this).slideDown(500);
});
Here is a demo: http://jsfiddle.net/jasper/8JFBA/1/
Update
Ok, so if you want the element to slide to it's new location here ya go:
//absolutely position the element and give it a top property so it doesn't go to the top of the container
$('#two').css({ position : 'absolute', top : $('#two').position().top });
//now get the offset to the bottom of the list by getting the top offset and height for the last list-item
var lastOffset = ($(this).children().last().position().top + $(this).children().last().height());
//now animate the element to the new position
$('#two').animate({ top : lastOffset }, 1000, function () {
    //when the animation is done, re-add the element to the new position in the list and reset it's position and top values
    $(this).appendTo('ul').css({ position : 'relative', top : 0 });
});
And a demo: http://jsfiddle.net/jasper/8JFBA/3/
Update
You can animate not only the element being moved to the end of the list but you can animate the rest of the list items as they move up:
var $LIs     = $('ul').children(),
    liHeight = 20;
$LIs.on('click', function () {
    
    var index      = ($(this).index()),
        $LIsAfter  = $LIs.filter(':gt(' + index + ')');
    
    console.log(index);
    
    $(this).css({ position : 'absolute', top : $(this).position().top });
    
    $.each($LIsAfter, function (i) {
        $(this).css({ position : 'absolute', top : ((i + index + 1) * liHeight) });
    });
    
    $(this).stop(true, true).animate({ top : (($LIs.length - 1) * liHeight)}, 1000, function () {
        $(this).appendTo('ul').css({ position : 'relative', top : 0 });
    });
    
    $.each($LIsAfter, function (i) {
        $(this).stop(true, true).animate({ top : ((index + i) * liHeight) }, 1000, function () {
            $(this).css({ position : 'relative', top : 0 });
        });
    });
});
Here is a demo: http://jsfiddle.net/jasper/8JFBA/8/
This isn't quite complete, there is still a bug or two, but it should help get anyone started on the idea.