In my case, the problem was caused by older files copied earlier to Sun app server lib folder (domains/domain1/lib). As I was also including newer files in the build (EAR file), I guess classpath precedence was picking the older files first. I removed all files from domain1/lib folder and everything works fine now.
PS. Hibernate 3.2.0.rc5 causes a rather nasty error in conjunction with Sun app server:
[#|2006-10-12T11:55:51.006-0400|INFO|sun-appserver-pe8.2|org.hibernate.dialect.Dialect|_ThreadID=14;|Using dialect: org.hibernate.dialect.Oracle9Dialect|#]
#
# An unexpected error has been detected by HotSpot Virtual Machine:
#
# EXCEPTION_ACCESS_VIOLATION (0xc0000005) at pc=0x6d6d78d6, pid=3408, tid=3144
#
# Java VM: Java HotSpot(TM) Client VM (1.5.0_06-b05 mixed mode)
# Problematic frame:
# C [zip.dll+0x78d6]
#
# An error report file with more information is saved as hs_err_pid3408.log
#
# If you would like to submit a bug report, please visit:
#
http://java.sun.com/webapps/bugreport/crash.jsp
#
So if your Sun app server crashes out of a blue, you might see this one in your log file.