Calling Timer.cancel in a Transaction does not delete the timer.
The Timer is marked as CANCELED if transaction is commited, thus ejbTimeout is not called.

However - the TimerImpl.TimerTask.run does nothing if Timer.isActive is false.

Proposed solution:
Either call killTimer in TimerTask.run, or treat CANCELED and EXPIRED the same way.

See JBoss Forum for source code (SessionBean+UnitTest) to reproduce the problem