You must have modified run.sh because the run.sh and run.conf files shipped with JBoss AS 4.2.0 do not use that environment variable.
Usually, to add system properties, you edit run.conf and add another line to set JAVA_OPTS, or add them to and existing JAVA_OPTS line.
The Kerberos set up documemnt states that these 2 Java System properties lines need to be added to the Application Server's start up script.
But you say I must modify run.conf and not the startup.sh file?
I found 4 run.conf files:
Which of these should I add the JAVA_OPTS line to?
You are going to have to ask the person that you got this setup from. In the offical JBoss AS 4.2.0 release there is only one run.conf file - in the bin directory. The three directories you mentioned under jboss4.2.0/server do not exist in Jboss AS 4.2.0 as released.