Note: I'm using Rails 3.0.3.
I decided to use jQuery instead of Protoype on my personal Rails 3 project. At first, I naively thought that I could simply include jQuery instead of Prototype, and everything would run just fine. Instead, I noticed that Chrome was reporting an error in rails.js, which eventually led me to Josh Huckabee's blog post, as well as the official jquery-rails gem.
The installation instructions on the github page are straightforward and simple, so I won't reproduce them here. After you add the gem to your Gemfile and install it, and you run the command:
rails generate jquery:install
it will pull down the latest version of jQuery. You should answer "yes" when it asks if you want to overwrite rails.js.
I modified my default layout (application.html.erb) to include this line:
Of course, you might not need some of these, and you can include additional files as well.