I have a running application on Tomcat 4.0.1 that has xalan.jar in webapp's WEB- INF/lib and nowhere else. The application runs fine. After updating to Tomcat 4.0.2, the application gives an error that it can't find the classes from xalan.jar. If I move the xalan.jar to CATALINA_HOME/lib, the application works again! It appears that the webapps classloader is not finding the classes under webapp's WEB-INF/lib directory.
This is a known issue which has been addressed. *** This bug has been marked as a duplicate of 6374 ***