I'd like to say that I solved the problem but I wanted post this here as a reference if anyone else is having the same problem.
I've been following this tutorial: http://wiki.phonegap.com/w/page/41524872/JQuery%20Mobile%20Tutorial%20(iOS)
to incorporate jquery mobile into my application. I am using the latest jquery library which is 1.7.2.
I can't get the outcome shown in the tutorial. Styling, behaviour, nothing works properly.
Turns out jquery mobile doesn't support the newest jquery library.
As soon as starting to use jquery 1.6.1, everything started to look and behave as shown in the tutorial. Why it is not compatible with an older version is beyond me. I probably should've followed the tutorial step by step but honestly, I thought newer versions of jquery are supposed to be better and backwards compatible.
I've been smashing my head off of my desk for 6 hours trying to get this stuff to work and finally resolved it with the following combinations;
used; cordova-1.6.0.js (with the associated script declarations in the header)
it was a very frustrating morning. thanks for pushing me into the right direction.