Unless , I'm missing something, the jQuery ui 1.8.x release seems to break the 1.7 widgets built with the widget factory which have specified their default options per the

      $.extend($.ui.mywidget, { defaults: { ...  

mechanism --> The widget factory doesn't generate options on the widget instance from the defaults.

This seems like a major change which is not properly represented by the minor release number change..

I assume it's coming, but at the moment there's also no documentation of these changes to the widget factory