Hiddink has made a big impact since being appointed manager at Stamford Bridge and the Blues produced one of their finest performances of the season to beat Liverpool 3-1 in the first leg of their UEFA Champions League quarter-final in midweek.
Chelsea will be looking to stay in contention for the Premier League title when they host Bolton on Saturday and Megson is under no illusions about the size of the task facing his men.
However, the Trotters are also in buoyant mood after thumping Middlesbrough 4-1 last weekend to move ever closer to safety
"We've got to go there thinking we can beat them because on our day we can beat anybody," said Megson.
"I watched Chelsea's game at Liverpool on television and it was terrific, a really fantastic performance.
"Liverpool were on top for the first five minutes but as the game progressed and after they went 1-0 down I thought Chelsea put on a fantastic show.
"Chelsea are a fantastic club and they're flying right now."
Great jobChelsea have moved to within four points of Manchester United at the top of the table and Megson thinks Hiddink deserves great credit.
"Guus has gone in there and done brilliantly - and it's the same everywhere he has been," praised Megson.
"He can do no more than get the results he has.
"Yes, he's got the best players in the world. He took over a team that I think was in third spot in the Premier League and was doing okay in the Champions League.
"Chelsea are fantastic football club with fantastic players and with that comes a great deal of expectation.
"At the moment Guus is doing a great job living up to that."
Not that Megson believes Hiddink's powers stretch to deposing United as domestic champions.
He said: "My tip for the title is still United. I think the race is wide open and United's game in hand at home to Portsmouth is huge.
"They have all got to keep performing and I don't think any of them can try and prioritise because they're all still in with a shout of winning the Premier League."