I faced the same issue in 1.1.0 BETA 2 release also.
I have no idea, its working great for me; I have never seen this. Are you sure your database table has a PK?
Sorry for not giving you enough details.
I am trying Seam with three tables[two tables with primary index, a few columns and third table holding key into each of these tables]. I have setup the table in MySQL 5.0 server and using the java 5.0.3 driver to connect. The JBoss server also runs from the same instance of the DB server[I installed the examples[DVD store, hotel booking, blog etc. and they are all working fine]. Also 'seam new-form' worked properly.
Tried it in a postgres DB instance and the generate-entities executed fine, however got some error messages which was due to the DB fields etc., which I think may not be due to Seam generation.
Let me know if you have some pointers for me to check.
The same fails for me, only Postgres is used instead.
After some more re-installs/tries found the issue!.
During 'seam new-project', I was creating the MySQL URL with jdbc:mysql:///testDB which is not getting default to localhost, with explicit mention of localhost in URL I was able to get the generate-entities going through. [jdbc:mysql://localhost/testDB].
Now the Many-to-Many mapping issue of Hibernate is hitting during the deployment, I guess that's the topic for another post!!.