I see some strange behaviour when I'm using hibernate.default_schema in persistence.xml with bundled HSQLDB.
I deploy a new EAR and the server-log says:
org.hibernate.tool.hbm2ddl.SchemaExport[ERROR] 2006-02-26 12:59:37,937 create(SchemaExport.java:272) ** invalid schema name: MOVIES in statement [create table movies.Movie] **
CREATE USER SA PASSWORD "" ADMIN /*C1*/SET SCHEMA PUBLIC CONNECT USER SA /*C2*/SET SCHEMA PUBLIC CONNECT USER SA /*C1*/ drop table movies.Movie if exists
CREATE SCHEMA movies AUTHORIZATION DBA