On one hand, I'd argue that if the instructions say we can use any production version of the Java 2 platform (that hasn't been superseded more than 18 months ago) then we already have official word. Sun did make a point of including that silly "Java 2" in the official title of the latest JDK, after all.
On the other hand, those pesky "junior developers" (the ones who need to be able to understand your code) may not be very familiar with the new JDK 5.0 features, so you might want to consider carefully whether (or how much) you should use those features in a production system at this point.
On yet another hand (yes, I have three - why are you looking at me like that?) the Sun company line is that most all the new features in JDK 5.0 make development easier. (And I agree.) So I think that Sun's graders would have a hard time justifying any points deducted for using new Tiger features. Just make sure that your code actually is simpler and/or safer (e.g. more type-safe) as a result.
I tried using "tiger" to compile my source files on my laptop. Then I use the jar utility to jar up the class files. It can run on my laptop, no problem at all, but once I port it overy to my two other coms running j2sdk 1.4, it couldn't run at all. An error message about the class versioning is being seen as the verbose in the command prompt. However, when I did the vice versa, the jar file can run on "tiger" as well as my other j2se versions. I don't think there is anything wrong with my way of jarring up the necessary files, through this incident, I guess I had better use back version 1.4.2.
New versions ususally support old version features, which is expected. However, as older versions wont have any knowledge on new versions, they cannot support Tiger features. Even you havent used any Tiger features, the bytecodes generated by Tiger may have some *magics*.