Ajax.InPlaceCollectionEditor works fine in Firefox (1, 1.5, 2.x) but when used in MSIE 7 out-of-the-box it breaks: the text it is anchored to disappears and MSIE raises an error, saying that a method or property is not supported by the object in question. I am finding this error both on my own site and also in the functional tests shipped with the libraries. (Load the functional tests into MSIE 7, choose "ajax inplacecollectioneditor test" from the list under "Controls". Click any highlighting demo and see it disappear and the error be raised.) The error produced is identical to the one I was seeing on my own site.
Interestingly, the IPCE successfully renders in the demos on the script.aculo.us wiki. I could find no fundamental difference between how I am invoking the IPCE and how it is invoked on the demos wiki, apart from the fact that, apparently, the wiki's code is not updated to the most current revision.