Thank you both for your reply, Finally I got it to work, actually I was trying to link to the library within a MasterPage while the ContentPage was located in another virtual directory, after i found the problem is because of incorrect reference I just changed directory to where my content page is located and problem solved.
about where I got vsdoc2.js, I'd say you can find this link here: http://docs.jquery.com/Downloading_jQuery (Under the Current Release). Richard has described everything about it. I have VS2008 installed but SP1 is not installed, so as I see this might be the reason why I can't get IntelliSense to work, if it's not so, just let me know. Again thank you both, at least know I can take advantage of using jQuery. you saved me hours of headache.
