In the ejb3/wizards/core/classpath/EJB3ClasspathContainer.java the Libraries are hard coded. I used a 4.0.4.CR2 where library locations of "hibernate3.jar", "ejb3-persistence.jar", "hibernate-annotations.jar"
have changed from server/.../deploy to server/.../lib.
The best way to resolve the problem is to make the library paths configurable.