Are you running both EJB's in the same JVM? That would explain it, as TX 
rollback won't affect the changes you've done to TestEntity, only the 
operations you've done on cache. That is  the changes TestEntity.update does on 
the object won't be affected by the TransactionManager.rollback call. Following 
will be affected though:

cache.put(fqn, "key", "1");
  | tm.begin();
  | cache.put(fqn, "key", "2");
  | tm.rollback();
  | assert cache.get(fqn, "key").equals("1") : "this is true, won't fail!!!";

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