The configuration changes dramatically. It now requires you to have
<application-policy name = "PostgresDbRealm">
<login-module code = "org.jboss.resource.security.ConfiguredIdentityLoginModule" flag = "required">
<module-option name = "principal">yourprincipal</module-option>
<module-option name = "userName">yourusername</module-option>
<module-option name = "password">yourpassword</module-option>
<module-option name = "managedConnectionFactoryName">jboss.jca:service=LocalTxCM,name=TaiwuDS</module-option>
setup in the login-conf.xml. (In my case, it is PostgreSQL.) Please note that in the previous version (3.0.1), SecurityDomainJndiName was actually commented out. However, in this version, it is not. This was how I guessed to figure out how to config.
<!--comment out this line if you want component managed security or want
to use the default values in the ManagedConnectionFactoryProperties -->
You can find the sample configuration in the connector directory.
I changed from 3.0.1 to 3.1.0aplha because I found two bugs. I fixed a simple one but another is way complicated to me. So, I gave up. Luckly I got 3.1.0alpha to work for me.
One more thing. You may remove the hsqldb-service.xml if you don't need it. Two datasource may cause problems in this alpha version. Wierd.