I solved my own problem after 2 months of looking.
Struts is the issue.
I could not get this error to occur when using straight Servlets, so it made me put my focus on struts. i'm currently using Struts 1.0.2.
I downloaded the RC1 of Struts 1.1 and ran my same code using it and this problem did not happen. Hot deploy is now working.
JBoss and/or Tomcat were not the issue.