Ok, I'll answer my own question.
The key to having this work is in the editRow, when you are doing the inline editing. As it does the save, and does not trigger other events.
I also found out that least in my Ruby 1.9.1 with Rails 2.3.2 the Javascript encodeURIComponent is redundant, and will cause the authenticitytoken not to work. (Despite plenty of examples that use it, possibly in older rails).
I can now do edits just fine with authenticyToken working as intended.
The final code:
http://www.pastie.org/477749
Here is the wrong way, with the encodeURIComponent:
Processing AirstateController#index to xml (for ::1 at 2009-05-14 16:09:31) [GET]
Parameters: {"nd"=>"1242288570914″, "_search"=>"false", "rows"=>"10″, "page"=>"1″, "sidx"=>"id", "sord"=>"desc", "controlle"*********HERE******** "
"GoSD7xNPpttz2h2VjDyi28rt6pXPao7KsMdnzPGBr3I="
"GoSD7xNPpttz2h2VjDyi28rt6pXPao7KsMdnzPGBr3I%3D"
Notice the "=" has been encoded in the one we are returning, but not
the one we are comparing it too.
After we remove the encodeURIComponent, the comparison is good:
"*********HERE******** "
"GoSD7xNPpttz2h2VjDyi28rt6pXPao7KsMdnzPGBr3I="
"GoSD7xNPpttz2h2VjDyi28rt6pXPao7KsMdnzPGBr3I="
Thanks for the help. Now on to the next issue.