HI
Instead of this use the JNDI Data source Configuration.

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

<!-- The Hypersonic embedded database JCA connection factory config
$Id: hsqldb-ds.xml,v 1.1.2.13 2004/04/19 12:47:36 ejort Exp $ -->



<local-tx-datasource>

<!-- The jndi name of the DataSource, it is prefixed with java:/ -->
<!-- Datasources are not available outside the virtual machine -->
<jndi-name>DefaultDS</jndi-name>

<!-- for tcp connection, allowing other processes to use the hsqldb
database. This requires the org.jboss.jdbc.HypersonicDatabase mbean.
-->
<connection-url>jdbc:hsqldb:hsql://localhost:1701</connection-url>

<!-- for totally in-memory db, not saved when jboss stops.
The org.jboss.jdbc.HypersonicDatabase mbean necessary
<connection-url>jdbc:hsqldb:.</connection-url>
-->
<!-- for in-process persistent db, saved when jboss stops. The
org.jboss.jdbc.HypersonicDatabase mbean is necessary for properly db shutdown
-->
<connection-url>jdbc:hsqldb:${jboss.server.data.dir}${/}hypersonic${/}localDB</connection-url>

<!-- The driver class -->
<driver-class>org.hsqldb.jdbcDriver</driver-class>

<!-- The login and password -->
<user-name>sa</user-name>


<!--example of how to specify class that determines if exception means connection should be destroyed-->
<!--exception-sorter-class-name>org.jboss.resource.adapter.jdbc.vendor.DummyExceptionSorter</exception-sorter-class-name-->

<!-- this will be run before a managed connection is removed from the pool for use by a client-->
<!--<check-valid-connection-sql>select * from something</check-valid-connection-sql> -->

<!-- The minimum connections in a pool/sub-pool. Pools are lazily constructed on first use -->
<min-pool-size>5</min-pool-size>

<!-- The maximum connections in a pool/sub-pool -->
<max-pool-size>20</max-pool-size>

<!-- The time before an unused connection is destroyed -->
<!-- NOTE: This is the check period. It will be destroyed somewhere between 1x and 2x this timeout after last use -->
<!-- TEMPORARY FIX! - Disable idle connection removal, HSQLDB has a problem with not reaping threads on closed connections -->
<idle-timeout-minutes>0</idle-timeout-minutes>

<!-- sql to call when connection is created
<new-connection-sql>some arbitrary sql</new-connection-sql>
-->

<!-- sql to call on an existing pooled connection when it is obtained from pool
<check-valid-connection-sql>some arbitrary sql</check-valid-connection-sql>
-->

<!-- example of how to specify a class that determines a connection is valid before it is handed out from the pool
<valid-connection-checker-class-name>org.jboss.resource.adapter.jdbc.vendor.DummyValidConnectionChecker</valid-connection-checker-class-name>
-->

<!-- Whether to check all statements are closed when the connection is returned to the pool,
this is a debugging feature that should be turned off in production -->
<track-statements/>

<!-- Use the getConnection(user, pw) for logins
<application-managed-security/>
-->

<!-- Use the security domain defined in conf/login-config.xml -->
<security-domain>HsqlDbRealm</security-domain>

<!-- Use the security domain defined in conf/login-config.xml or the
getConnection(user, pw) for logins. The security domain takes precedence.
<security-domain-and-application>HsqlDbRealm</security-domain-and-application>
-->

<!-- This mbean can be used when using in process persistent hypersonic -->
jboss:service=Hypersonic,database=localDB
</local-tx-datasource>

<!-- This mbean should be used only when using tcp connections. Uncomment
when the tcp based connection-url is used. -->

1701
true
default
false
true



<!-- This mbean can be used when using in process persistent db -->

localDB
true



Save this in file hsqldb-ds.xml and put in the deploy directory.

Alternatively

The Driver you are looking for is org.hsqldb.jdbcDriver
URL is given in the <connection-url> tag. Alternatively you can refer the Beginers guide for JBOSS from the site

Regards
Sriram