Under preferences, MyEclipse, J2EE Project, Web Project Demployment, Web Project Build Path Policy, I have the first option checked (Yes, automatically add WEB-INF/lib/[*.jar|*.zip] to Web Project build paths).
Though after the initial CVS update I had to go to the the project build path and add all the WEB-INF/lib/* files manually as external jars. I can’t find this as a known bug.