The gel in the phone jack has seeped and covered the connectors in the female part of the jack causing no dial tone. I was told to simply replace the jack. Should I be worried about this?

No. Look for signs of corrosion on both pieces.

I did do that and there was no corrosion. In fact the phone was working and then a heard a strange boop - and later discovered the phone was out.
The wires are clean and fairly new (October 09) - I was worried about causing further damage or possible a fire hazard.

Be sure the gel isn't holding any debris.
If calling your phone rings busy, look inside jack and see if a pin got pushed in the next pins slot.
If calling your phone and it rings and rings a wire may be broke.