post your configs properties files.
Hind attached the configuration files.
Another file: login-config.xml from server/default/conf/
After going through a painful exercise of figuring out what is really wrong with my configuration, i finally figured out the Jboss distribution I was using 3.0.4 with Tomcat bundle has this bug in it.
I tried to do the same thing with the JBoss3.0.2 binary and it worked like a charm.
May be somebody could post a bug with the JBoss folks regarding this.