I have found the problem. The JBoss Classloader are not able to load the Classes mentioned in the Castor which are in the WAR file or WEB-INF/Classes.
Try changing the Java2ClassLoadingCompliance --> false in the tomcat41-service.xml file.
It changes the way JBoss does it's classloading..
Let me know how it works.. also I'd prefer to use Java2 class loading as well since it unifies the classpath scope. However, when I do I get other problems.. so if you find a way around this it would be kewl!