Correction to my previous post.
I looked at the prefs.js file again and found that the lines were re-arranged and one line was missing. I added the missing line back in and (after being re-arranged again) the CAPS method is working (with NoScript installed).
Final result in prefs.js
user_pref("capability.policy.localfilelinks.checkloaduri.enabled", "allAccess");
user_pref("capability.policy.localfilelinks.sites", "
http://myserver");
user_pref("capability.policy.maonoscript.checkloaduri.enabled", "allAccess");
user_pref("capability.policy.maonoscript.javascript.enabled", "allAccess");
user_pref("capability.policy.maonoscript.sites", "addons.mozilla.org afx.ms ajax.g[snip long line]
user_pref("capability.policy.policynames", "localfilelinks");