John,
Actually if you switch to your Navigator View, double check that the WEB-INF/classes dir doesn’t already contain the log4j.properties file… all source folders are “built” into the WEB-INF/classes dir, which is then deployed by MyEclipse. If the output dir for the properties source dir is something other than the default, then that is the problem.
You want to keep it in a many-to-one association (many source dirs, if you want, to one output dir, that MyEclipse deploys)