Ok here we go --
EAR consists of a facade Session been and a BusinessTX session bean (Stateless)
so naturally all hibernate jars and config information resides at the ejb module level --
Yet, to initialize the SessionFactory at startup of the Application -- I have a Servlet (Startup) that loads first thing ---
Yet It is un-able to find hibernate.xml -- I would hate to hard code the local of this file in the Servlet or in a properties file...
Does Hibernate sessionFactory know about J2EE classloaders or does it just work off of the local classpath to which it resides in ?

Try to add a classpath Element which lists the jar containing the hibernate.cfg.xml to the jar where you initialize Hibernate.

How about a Manifest file with a CLASSPATH reference to the EJB/META-INF/lib directory with jar files listing and the xml listed ?

That jar would be the ejb.jar--
Which J2EE the web-module has visiblity of the EJB classpath

?

The key is the classpath element I would say, play around some with it.