I just installed JBoss 3.2.4 and left everything configured the same as my JBoss 3.2.5 installation. Hypersonic loads fine and the Duke's Bank application runs perfectly. Still a no go on 3.2.5!
nevermind my comments. I had a typo in my hsqldb-ds.xml file. Hypersonic loads fine on JBoss 3.2.5 as well.