Check out Aptana.TV, a site just for screencasts demonstrating Aptana, an insanely fun to use IDE for AJAX developers based on Eclipse that offers almost Andrew-like (anybody still remember Andrew?) edit-and-play experience, almost too much context-sensitive help, and crazily useful javascript IDE macros (editing command keys seem rather odd though and caret likes to play hide-and-seek). You can run it as is or run it inside an existing Eclipse installation. Ruby nuts can create a powerful combo by using Aptana and RadRails together. They are both Eclipse plugins after all. Aptana was founded by Paul Colton, the JRun guy.
As to which AJAX library to use, I am now favoring Yahoo UI library for base functionality because YUI is well documented and thoroughly tested and because Douglas Crockford's presentations showed that they know what they are doing and are carefully cultivating the YUI library for practical use of AJAX without going overboard with excitement like most AJAX developers I've run across. I haven't tried it yet but I think complementing YUI with judicious use of AFLAX could be very effective.
Update:
After spending an evening with Aptana, I found some problems with Aptana editor views. It sometimes get confused with JSP pages. Auto-complete support is too eager and sometimes mangles nearby tags. Like I mentioned, caret disappears. I couldn't find manual pretty formatting. Smart indentation seems to conflict with Eclipse settings. I like it overall though. HTML pages are hosted through an embedded web server of sort so there is no need to deploy to a web server to see what your AJAX code does. Although turnaround time saving is probably only a few seconds, smooth edit-save-click cycle really makes tinkering fun.