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Just a short addition to your post...
I have upgraded to Magento 1.4 and in the admin panel System -> Configuration -> Developer -> The tab Javascript settings: Merge JavaScript Files (beta) should be set to No, otherwise if you try to add jquery it will throw an error and none of the previous loaded js files will work. Also you can still use the magento/js folder to add jquery in the page.xml file in the head section as i described it in my previous comment.

Zoran     Monday 8 Mar.

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