Problem #1: SELECT objects have an add method, so it's getting called instead of your add function.

Problem #2: You call add with no arguments, yet you specified it requires ones.

Here's the fix, and I cleaned it up to adhere to convention.

Perl
----
use Sajax;

sub populate {
    return 'Hey';
}

Sajax::rs_init();
Sajax::rs_register("populate", \&populate);

...


JS outputed by Perl
-------------------

function do_populate() {
    x_populate(do_populate_cb);
}

function do_populate_cb(N1) {
    document.write(N1);
    document.write('I\'ts Me');
} 


HTML outputed by Perl
---------------------
...
<SELECT NAME="selectCourseDept" onChange="do_populate(); return false;
+">
...
[download]

Passing the selected course around:

Perl
----
use Sajax;

sub populate {
    my ($course) = @_;
    return "You selected $course";
}

Sajax::rs_init();
Sajax::rs_register("populate", \&populate);

...


JS outputed by Perl
-------------------

function do_populate() {
    x_populate(selectCourseDept.value, do_populate_cb);
}

function do_populate_cb(feedback) {
    feedback_field.innerText = feedback;
} 

HTML outputed by Perl
---------------------
...
<p>
<SELECT NAME="selectCourseDept" onChange="do_populate(); return false;
+">
...
</SELECT>
</p>
<p>You selected: <span id="feedback_field"></span></p>
...
[download]

Untested.