yes, it's not possible to connect to hsqldb anymore for security reasons. if you want it, you should modify the file deploy/hsqldb-dx.xml and change the settings to have it again.
Maybe it would be usefull (especially for new users) to add this info to HSQL help page.
Best regards Pawel.
Forget Squirrel and use the hsql (built-in) tool you already have:
1) by executing (under jboss where you have the hsqldb.jar):
java -cp hsqldb.jar org.hsqldb.util.DatabaseManagerSwing
2) connect to the nukes database - use "HSQL database engine standalone" (make sure jboss is not running):
replace X with a path and the name of the database - under server/default/data/hypersonic usually - see nukesDS or the DS you are interested in
quite easy if you can stop jboss for the time of the db access.
or use mysql :-)