This week's book giveaway is in the Other Open Source APIs forum. We're giving away four copies of Storm Applied and have Sean Allen, Peter Pathirana & Matthew Jankowski on-line! See this thread for details.
I finally resolved it and listing it for anyone else who may face the problem.
The issue was that I was thinking that my JDK version was the culprit, but I found that the Java EE 5 libraries I was using were had the older version of JAXB(2.0) bundled while my JDK 1.5 update 16 had the JAXB 2.1 bundled libraries.
I simple got rid of the EE libraries and placed the ones which had JAXB 2.1 bundled.
The issue was because the JAXB 2.0 libraries can't understand the JAXB 2.1 schemas.