This thread actually solved my problem, indirectly:
The key is:
One other potential trap is that I have just upgraded from Seam 1.2.1 to 2.0b1 and "managed-persistence-context" has been moved from namespace core to persistence. If this is the case, then don't forget to add the persistence namespace to your XML namespace config:
I am actually using Seam 1.2 and thus I must revert to core tag. And it works!