No romex is not illegal in NJ. In NJ the codes are adopted by the Department of Consumer Affairs (DCA) and are applicable through out the state. No municipality can create or adopts codes of their own. Here is a link that you can find out what codes have beeen adopted and any alterations to them. http://www.nj.gov/dca/codes/
We are currently in a grace period this is the period of 6 months transition between the last code adopted and the newest code adopted. Until 10/6/09 when you apply for a permit you may declare that your still using the 2005 NEC. If you do not state this at that time you are considered to be using the 2008 NEC. Starting 10/6/09 all electrical applications will have to use 2008 NEC.
