i think the jewels will still work, but they may work differently...
for example, Aldur's set has a complete set bonus of +350% damage, but it's not on the weapon so it works a little different...
here's what the Areat Summit says about the set bonus:
"Aldur's Watchtower - The 350% Enhanced Damage is on the complete set, not on the weapon. Enhanced Damage from non-weapon equipment works like Enhanced Damage from skills and the strength bonus, which is different from how Enhanced Damage on the weapon works. Essentially, the 350% ED will add 350% of your weapon damage to your total. With a 60-93 damage weapon, that means the 350% Enhanced Damage will add 210-325 total damage. This is really not very significant, but it's not a bug, just a balance issue."
but if that's how ED works off of non-weapon sources, i'm not really sure how it works when it's actually on the weapon being used...
so yeah, i think it's supposed to work, but not very well... there are better things to put in your helmet, armor, and shields than ED jewels and whatnot.