I am trying to use the Nivo JQuery Slider (http://nivo.dev7studios.com/) and a Scrollable Gallery (http://flowplayer.org/tools/demos/scrollable/index.html).
Now I have
Jquery Tools website says that an upgrade is due out in just over a month bringing it in compliance up to Jquery 1.6.
That being said, there's a ton of different ways to skin this cat, and most aren't this behind the times. I've been using jQuery Infinite Carousel with great success. It looks and acts nearly identical and is written with no conflicts with the latest version of jQuery.
It wasn't clear from your posting, but I would avoid loading two different versions of Jquery if you're doing so. It's a TON of extra overhead that's really not helping your site at all.