I'm experiencing the same thing. It's limited to the use of jquery UI functions. So, for example,
Add a wrapper:
foo.wrapper= $('<div id="foo">').appendTo(masthead).html(" ");
Pull in some html. . no problem.
$(foo.wrapper).load("http://foobar.com/foo.html", "", rebind);
Add some CSS in the callback (rebind), no problem.
$(foo.wrapper).css("border","3px solid red");
Fade the Div out in the callback, no problem.
Do anything at all related to jqueryUI, and bork. The attached error can be caught (see attached image), but if the statement isn't wrapped in a try catch, everything just dies.
$(serum.wrapper).tabs(); / Same problem.
We're calling 1.3.2 in the chrome overlay as well, but from a remote spot. I've tried calling it from different locations (the hosted Google instances here: http:code.google.com/apis/ajaxlibs/documentation/index.html#jquery for example) and run into the same issue.