I think this is a bug.
When you generate the build.properties file with 'seam setup' and you choose a database (e.x. db2). You are prompted to set the default_schema property.
Then if you use 'seam setup' again but you choose mysql you are not prompted for the default_schema property, but it is unchanged in the build.property file. This causes problems when the persistence*.xml file is generated, and hibernate fails.
Please report it in JIRA. Workaround is to delete seam-gen/build.properties when switching to MySQL.