What is the best way to add the latest version of jQuery to a theme?
In my opinion the best solution is to replace drupal jQuery with the latest jQuery only on the pages where you really need it. If you go on with newest jQuery many of drupal out of the box functionality will be broken. 

You can remove native jquery like in the code snippet below only on certain pages that meet your conditions:

function MYTHEME_preprocess_page(&amp;$variables, $arg, $delta) {
  if(YOUR CONDITION HERE) {
    $scripts = drupal_add_js();
    unset($scripts['core']['PATH TO DRUPAL JQUERY']);
    $variables['scripts'] = drupal_get_js('header', $scripts);
  }
}


to add your newest jquery file you can use drupal_add_js('path to yor newest jquery') function.