<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by B747-437B:
Batteries inside electronic devices are fine.
Spare batteries are not permitted as carry-on luggage. The security staff will not confiscate them, but rather place them into custody with the airline who will return them to you at the end of the flight (thats the theory at least! 
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I remember the times they tried to do such with my laptop too.