JQuery datepicker not displaying correctly

I recently migrated from JQuery 1.2 to JQuery 1.3. However, the DatePicker UI is giving me the problem. I have a textbox with a JQuery dialog. A datepicker is attached to this field. When I click on a field, the datepicker pops up, but behind the dialog box, which blocks almost the entire DatePicker. Also DatePicker does not appear next to the textbox but below it. Is there anything I can do to position the datepicker correctly?

EDIT: Here is my datepicker declaration:

 $("#date").datepicker(
    { dateFormat: 'DD, d MM yy',
      minDate: 0,
      showOn: 'button',
      buttonText : "Choose a date",
      buttonImage: '/images/calendar.png',
      buttonImageOnly: true,
      hideIfNoPrevNext: true
    }
   );