The knobHandles feature was removed as part of the transition to the new jQuery UI CSS Framework. The same can be achieved by css. This allows for the styling of the handles to be configurable and themeable, neither of which the 1.5.3 version offered (as the styling was done inline). Here's the css for doing 1.5-styled knobHandles in 1.6rc6/1.7:
.ui-resizable-handle {
width: 8px; height: 8px;
border: 1px solid rgb(128, 128, 128);
background: rgb(242, 242, 242);
}
.ui-resizable-n, .ui-resizable-s { left: 45%; }
.ui-resizable-e, .ui-resizable-w { top: 45%; }
.ui-resizable-se { bottom: -5px; right: -5px; }
See attached for full code samples of knobHandles in 1.5 compared to 1.7.
This will be fully documented in the Upgrade Guide (in progress) as part of the 1.7 final release.