Continuing to try different paths:
From this dir,
C:\jboss_examples\examples\src\main>tree
C:.
└───org
└───jboss
├───chap12
│ ├───hello
C:\jboss_examples\examples\src\main>ls org\jboss\chap12\hello
Hello.java HelloServlet.java wsdl
HelloBean.java config.xml
From here I tried again, specifying the whole path to the config file and including the whole path in my specified CP.
C:\jboss_examples\examples\src\main>C:\Sun\jwsdp-2.0\jaxrpc\bin\wscompile -classpath c:\jboss_examples\examples\src\main\org\jboss\chap12\hello -gen:server -f:rpcliteral -mapping mapping.xml org\jboss\chap12\hello\config.xml
error: RmiModeler error: java.lang.ClassNotFoundException: org$jboss$chap12$hello$Hello