I have been considering switching completely away from J2EE towards Hibernate, partly because many of the client/server systems I write don't require (or even have the resources for) a full application server and partly because I prefer the flexibility of choosing my own system architecture.

I would need a cluster-capable persistence engine, which I see that Hibernate now offers, which is great. But I would also need to notify remote clients of updates to the data - a kind of change-propagation mechanism.

I see that there is some kind of callback/interceptor facility there, but does that work across a cluster? If I have two servers (A and B), which are clustered, and each has a remote client attached (A<-A2 and B<-B2), if A2 creates/edits/deletes some data, I want B to be actively notified somehow, so that it can tell B2 to refresh.

My intention is to eschew web interfaces in favour of full applications which are capable of live updates in response to changing data. It is the cluster-update-notification part that is currently eluding me in the docs.

Is this possible with Hibernate?

This is probably doable with an interceptor, but painful and not scalable.
Have a look at section 12.2. of the reference guide.