I too am getting this same exact error. I also have edited the file as the JBoss 
turorial said.

Here is the lines from my edited hsqldb-ds.xml file in the default server directory...
      <!-- The jndi name of the DataSource, it is prefixed with java:/ -->
      <!-- Datasources are not available outside the virtual machine -->
      <jndi-name>DefaultDS</jndi-name>

      <!-- for tcp connection, allowing other processes to use the hsqldb
      database. This requires the org.jboss.jdbc.HypersonicDatabase mbean.  -->
      <connection-url>jdbc:hsqldb:hsql://localhost:1701</connection-url>

      <!-- for totally in-memory db, not saved when jboss stops.
      The org.jboss.jdbc.HypersonicDatabase mbean is unnecessary
      <connection-url>jdbc:hsqldb:.</connection-url>
-->
      <!-- for in-process db with file store, saved when jboss stops. The
      org.jboss.jdbc.HypersonicDatabase is unnecessary
      <connection-url>jdbc:hsqldb:${jboss.server.data.dir}/hypersonic/localDB
      </connection-url>
-->

      <!-- The driver class -->
      <driver-class>org.hsqldb.jdbcDriver</driver-class>
.....
   <!-- This mbean should be used only when using tcp connections. Uncomment
   when the tcp based connection-url is used.  -->
   
     1701
     true
     default
     false
     true
   



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