Robin2:
This is a common problem. Try the ServoTimer2 library. And if that does not solve the problem you might try my yet another software serial...R
For the benefit of others, I tried Robin's suggested ServoTimer2.h library to replace the standard Servo.h library. It did not solve the problem of a conflict between SoftwareSerial and Servo library for me. I still had the annoying twitching on the servo due to communications over the serial. (Basically, every few seconds, when a bluetooth module connected to the serial would send data, the servo would make a small little jump, moving degree by degree over time).
I looked at Robin's "another software serial" post, but it was over my head technically. I suppose I could have powered through it and figured it out eventually, but laziness won out. 
I then tried a different servo library called Servo2. Can't remember where I downloaded it from, but it is google-able. When I first tried to compile my sketch (with the "#include Servo2.h"), i got an error related to wiring.h in a file called Servo2.cpp. (Not to be confused with another file called Servo2.h)
After a little google research, it appears that "#include <wiring.h>" needs to be changed to "#include <wiring_private.h>" inside this file. So I searched in the appropriate folder on my computer and found the file Servo2.cpp, opened it up with a simple text editor, and replaced "#include <wiring.h>" with "#include <wiring_private.h>".
I then compiled and uploaded the sketch again (no error this time!) and everything worked great. The annoying twitch of the servo caused by serial communications totally went away. Woo hoo!