I found the answer for this;
The trouble I was having was setting the tomcat valve in JBoss 7. Previously this was done in tomcat configuration files and is documented in BlazeDS docs.
Now the configuration is achieved by;
1) putting flex-tomcat-common.jar and flex-tomcat-server.jar in the WEB-INF/lib folder of your blazeds war and in the same war
2) in your jboss-web.xml under WEB-INF the following content
The blazeds configuration remains the same.
It's an obvious improvement, I guess it's to do with OSGI ?