You only need the driver jar in one place - I'd suggest putting it in the instance lib rather than the master lib e.g. put it in server/default/lib.
I hope you named the datasource file mysql-ds.xml and this was just a typo. JBoss 3.2.x will only interpret a file as a datasource configuration if named *-ds.xml.
Other than that the driver should be:
Because Case really does matter. ;)