You've got the latest release. While RC8 is derived from the JBoss 4 source, Embeddable Alpha 8 is derived from JBoss 5 source.
Please check your classpath. TransactionImpl.xidFactory is incompatible between JBoss 4.0.4.GA and JBoss Embeddable Alpha 8. Make sure the embeddable jars in <EJB3E>/lib are at the top.
I found out that when removing the JBOSS 404 EJB3 libraries from the classpath, then the embedded server started successfully.
However, I was thinking it would be better to use the RC8 version together with JBOSS 4.0.4 - do you know where I can download this version?
Do you see any conflicts in using ALPHA_8 to unittest, using JUnit, a application which is ment for deploy on JBOSS 404?
You can find all downloads via www.jboss.org => EJB 3.0 Download etc.
The functionality of the embedded stack is more limited than the full EJB3 stack, so if it works in embedded it should work in full.