jQuery Grid Plugin - jqGrid

I'm using Cell Editing with the latest version of the jQuery and jqGrid. I'm doing all communication in JSON and so far everything was great.

But I can't any documentation for how the server response should look like after updating a field. How can I indicate whether or not the update was successful and in case of error what the problem is? Right now jqgrid just always assumes that the update was successful!!

Any time I try to output something I get a "200 : OK parsererror". I trying to output JSON, but I'm now wondering if that is not possible and that it requires XML... --- Indeed when I return XML it works fine. Can't I change that so that I can return JSON?