I have the following static html:
.live() is event based, so you can't use it for plugins like this. What you can easily do is call that code when your AJAX call finishes, for example:
$.ajax({
//options...
success: function(data) {
//create UL
$("#mylist").sortable({axis:"y"});
}
});
The same goes for short forms of $.ajax(), for example:
$("#mylist").load("pageThatGivesTheLIElementGoodness.htm", function() {
$(this).sortable({axis:"y"});
})