it definitely sounds like jquery 1.4.1 is enforcing strict json rules (http://yehudakatz.com/2010/01/15/jquery-1-4-and-malformed-json/) and that is why the error is occuring. that line in fullcalendar.js is where it parses the feed, so makes sense. i'd look at the json in firebug and see if there are double quotes around every string. if not, this is definitely your problem.
im not that familiar with cakephp, but if you want a quick hack with events as a function, i'd do the following or something like it...
$('#calendar').fullCalendar({
events: function(start, end, callback) {
$.getJSON('yourfeed.php', { start:start, end:end }, function(data) {
callback(eval("(" + data + ")"));
});
}
});