What is the best way to add the latest version of jQuery to a theme? This is just a simple question I have. I'm most interested in seeing what others are doing to use the latest version of jQuery in themes.

The reason for this is that some of the best jQuery plugins I use require much later versions of jQuery than what Drupal comes with.

I have tried the update jquery module but it is not as good for Drupal 6 sites.

Is there another way outside of adding your own version of jQuery. Then once you have it finding and replacing jQuery with something like myQuery and sticking myQuery.noConflict() at the end? And then once this is done rewriting plugins to work with myQuery?
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.