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Can you try Help > Check for Updates?
The JTDS JDBC Driver should be there as well.
1.3 definitely won't work, we only support v1.2
I personally have had more success using Tools > Preferences > Database > Third Party JDBC Drivers > Add Entry.
Just be sure to point to the jtds-1.2.jar file in the Select Path Entry dialog. The dialog will accept a zip file or a folder as the selection, but those will not work for you in terms of activating the SQLServer / Sybase tabs in the New / Select Database Connection dialog.
Hope this helps,
SQL Developer Team
thank you for everyones help. The issue as not selecting the JAR file. The JAR file looked like the zip file. MS SQL now shows