The xalan.jar actually needs to be removed if its moved out of the server endorsed/lib as it has no effect elsewhere. The bundled jdk version will be picked up for non-scoped class loading.
Okay, so we leave the removal for 4.0.4?
Currently, if you remove it completely, it complains when run under jdk5.
With a quick seach in the code I see org.apache.xalan being referenced by:
aop/src/jdk15/org/jboss/aop/standalone/AOPTransformer.java
aop/src/main/org/jboss/aop/hook/JDK14TransformerManager.java
(harmless just avoids advising org.apache.xalan classes)
and
varia/src/main/org/jboss/boot/servlets/Util.java
However, the error when booting jboss actually comes from the XSLTSubDeployer, but I don't get it why it tries to find the org.apache.xalan implementation (and not revering to the jdk5 one com.sun.org.apache.xalan.internal.xsltc.trax.TransformerFactoryImpl)
--- MBEANS THAT ARE THE ROOT CAUSE OF THE PROBLEM --- ObjectName: jboss.jca:service=ConnectionFactoryDeployer State: FAILED Reason: javax.xml.transform.TransformerFactoryConfigurationError: Provider org .apache.xalan.processor.TransformerFactoryImpl not found