The code from cluster-service.xml is not your problem - since the cluster memebers are able to find each other.
If Session Clustering is not working, check the following :
1.Have you put in your web.xml?
2. Have you put jbossha-httpsession.sar in your deploy directory?
I have got everything working with JBoss-3.0.3_Tomcat-4.0.5.. dont know about Jetty.
Yes, you should really always use the most recent version of jboss. 3.0.1 is already pretty old.