This is either a straight memory issue or you have reached a thread limit on your OS. BTW, what is your OS?
Jetty is attempting to create a new thread to service a request - I'm not quite sure what at this stage as I'd need to check the Jetty source. However, your JVM is complaining it doesn't have enough memory to create a new thread (process).
What is your memory allocation for the JVM - you can set it through JAVA_OPTS in the JBoss run script. The default Java configuration has a maximum heap size of around 16M I think. SOAP tends to chew up a lot of memory as the usual parsers tend to do their work in memory so they could work against you as well. Try to give the JVM as much memory as possible if you haven't already done so. -Xmx256m (java -X to look at what the -X arguments are) if you can afford it.
I'll assume that your JBoss server is not so loaded that it can't physically create any more processes/threads.
Otherwise, let us know your configuration and we can see if there is any other possible cause.