Our project has a similar layout to what you describe, and LinkLibraries works fine for us. It gets the dependencies exactly right, without any evil hacks, and without libraries in a central location. Libraries don't get grist (at least in stock jam 2.3) so as long as you don't have 2 libraries with the same name, there shouldn't be any problem with jam determining what library you mean. It's hard to guess what the problem might be without more details on what you're doing, but if you're giving the path to libmumble in the LinkLibraries rule, that might be what is confusing jam. You don't need to give the path or suffix when you mention libmumble in the LinkLibraries rule.

Steve