How did you deploy your servlets? In JBoss, you should create a war file and copy the war file to the server/default/deploy directory (for example, you would have server/default/deploy/foobar.war). Then you can access index.html as http://locahost:8080/foobar/index.html.
Depending on the services you installed (I assume you used the installer jar file, and not the zip file), a 1.5MB log file for startup is normal. You can controll this via the loj4j.xml file in server/default/conf.
I'm new to all this as well, but seem to have had some decent luck.
The solution I took to was using NetBeans, which made it trivial to make and deploy .jsp stuff. It can send 'em to TomCat or JBoss, which I discovered were using a different ports -- so make sure you're using the right URL.
If I understand things correctly, you do not have a directory you drop JSP files into, but rather you create a WAR file (NetBeans does it for you) and move it to JBoss's server/default/deploy directory (which NetBeans also does for you).
The JBoss log files are large because they are also capturing DEBUG and INFO log items -- in other words, the system is deliberately being extremely verbose so you can see everything at a very granular level.
I believe there was a typo in the last reply, and that the file to turn this logging down a notch is log4j.xml.
But I understand your frustration, you're expecting to see a file get accessed and a 404 if it isn't there. Instead, I think it's looking inside the WAR file, and if it can't find the deployment, it just tells the browser it has no idea what you've requested. I'm not sure this appears in the log, though I suspect it does, only as some other message and not a 404. Perhaps something like no web application by that name?