You can run both jQuery and Mootools libraries on the same site, but there is a trick.
Add the link jQuery.noConflict(); to that last line in your jQuery js libary (jquery-1.3.2.min.js)
This will change the namespace that jQuery uses from $ to jQuery. This way jQuery and Mootools won’t step all over each other.
You do have to change all your jQuery functions to use jQuery instead of $.
I assume this works also if you trying to integrate jQuery with the ASP.NET Ajax libraries, but I have not tested it in that scenario.
Here is a link explaining in more detail.