You will need to run JBoss also using JDK 1.7. So before running JBoss set the JAVA_HOME inside the "standalone.conf" file or export the JAVA_HOME variable in the command prompt/terminal before starting JBoss.
This is because the class org/apache/derby/iapi/services/io/FilePermissionServiceImpl is compiled for the target version 1.7 (as mentioned by the major.minor version 51.0 Error)
This issue has nothing to to with tomcat or jboss-deployment-structure.xml. If you want to double check the same then check your tomcat logs "It must be running on JVM 1.7"
I am running Snow Leopard on an IMac which includes ONLY Java 6, unfortunately Mac's are not as easy as Windows to upgrade the version of Java so I am stuck with Java6 unless I upgrade the whole OS.
I finally found the answer, in my war file I was including derby.jar, derbyclient.jar, derbynet.jar and derbyrun.jar however, using a JDBC connection to my derby database I only needed to include derbyclient.jar so after removing the others the problem went away.
Looking further at this, when I used the command file FilePermissionServiceImpl.class it gave me
FilePermissionServiceImpl.class: compiled Java class data, version 51.0
indicating that this class was indeed compiled with Java7