What happened with AHAH?
Better late than never...

Well the problem is in the Drupal server response, which is not valid json. You need to patch drupal_js function in commons.inc.

diff --git a/includes/common.inc b/includes/common.inc
index 80fc911..084b5fc 100644
--- a/includes/common.inc
+++ b/includes/common.inc
@@ -2551,8 +2551,8 @@ function drupal_to_js($var) {
     case 'resource':
     case 'string':
       return '"'. str_replace(array("\r", "\n", "&lt;", "&gt;", "&amp;"),
-                              array('\r', '\n', '\x3c', '\x3e', '\x26'),
-                              addslashes($var)) .'"';
+                              array('\r', '\n', '\u003c', '\u003e', '\u0026'),
+                              str_replace("\'","'", addslashes($var))) .'"';
     case 'array':
       // Arrays in JSON can't be associative. If the array is empty or if it
       // has sequential whole number keys starting with 0, it's not associative