1. put jtds-0.6-rc1.jar in jboss/server/whatever/lib
2. create mssqlserver-jtds-ds.xml in jboss/server/whatever/deploy with this content:

<?xml version="1.0" encoding="UTF-8"?>

<local-tx-datasource>
<jndi-name>DefaultDS</jndi-name>
<connection-url>jdbc:jtds:sqlserver://127.0.0.1:1433/DatabaseName;SelectMethod=cursor</connection-url>
<driver-class>net.sourceforge.jtds.jdbc.Driver</driver-class>
<user-name>sa</user-name>
password
</local-tx-datasource>

i guess pre tags do not work that well... i'm reposting the xml unformatted:

<?xml version="1.0" encoding="UTF-8"?>

<local-tx-datasource>
<jndi-name>DefaultDS</jndi-name>
<connection-url>jdbc:jtds:sqlserver://127.0.0.1:1433/DatabaseName;SelectMethod=cursor</connection-url>
<driver-class>net.sourceforge.jtds.jdbc.Driver</driver-class>
<user-name>sa</user-name>
password
</local-tx-datasource>

ok, i guess the system removes the password xml tag -- just change the password text to an xml tag!