Hmm... you talk about old school, but you don't know, how to setup a project without an IDE? Maybe it's time to start using an IDE. It really helps you.
Setting up a project with xith is nothing different to other projects. Never copy anything to the JRE sub folders. This will certainly interfer with other projects. Just copy the third-party folder from the xith release and setup your classpath and native library locations as it is done in the launcher shell script. Shouldn't be that hard for an old-schooler

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Marvin