Eclipse's normal Java perspective seems to hide Referenced Libraries just fine (in a "Referenced Libraries" folder in your project). Unfortunately, the Java EE perspective does not seem to have this same feature and enabling it is non-intuitive.
Can anyone shed some light on this issue?
As far as I can tell, the Package Explorer in the Java EE perspective (Eclipse 3.5) works different from the Java Perspective. If you filter 'Libraries from external', it does not remove the classpath container (EAR Libraries, JRE System Library, etc.), but they will be empty. Also, it does not seem to want to present working sets as the top level element. Guess it needs some TLC. :)
The "Referenced Libraries" view is available in the Java perspective, in the Package Explorer view.
In the Java EE perspective, the Project Explorer view is the default (as opposed to the Package Explorer view). Therefore, if you wish to view the Referenced Libraries, you must open the Package Explorer view in the Java EE perspective.
Note that this view will not remove the user libraries that have been added to the project. The use of Referenced Libraries is primarily for user jars, or jars internal to the project, often placed under the lib directory of the project.
click on menu on upper right of package explorer -> Customize View -> Content tab -> uncheck "Java Elements"
d-u-n DONE