The class XAManagedConnectionFactory uses the replace method of the Strings utility class to replace all single backslashes with double backslashes, the replace method is initially appending the double backslash to the string before the replacement takes place - the end result is all passwords end up with the additional appended backslashes causing authentication with the DB to fail.

In Strings.java line 768

JBossStringBuilder buffer = new JBossStringBuilder(string + replacement);

needs to be replaced with

JBossStringBuilder buffer = new JBossStringBuilder(string);