Based on the example that Kev supplied via email we’ve isolated this as a bug in the JSP compiler when the project is stored outside the workspace (ie. not in its default location). We’ve entered the issue into our internal tracking system and will address it in an upcoming service release. The workaround for the time being is to use the default location for web project creation.
Sorry for the inconvenience, but thanks to all for helping identify this problem so that we can address it.
–Scott
MyEclipse Support