does package need to be in jar for ant build script

You can just leave the class files in file system directories - but as normal, that directory hierarchy should match the package structure of the classes.

Basically, an Ant classpath is just like a classpath in a normal Java tool - just with fancier features such as property substitution. Ultimately in most cases it'll be passed to a normal Java tool in just the same way as you'd specify it on a command-line, so anything that's supported on the command-line is likely to work in Ant too.