Sorry but I left the chat and didn`t see your question.
I had to escape the & character in the jdbc in the xml file. I think one should also escape it on the admin console. I think that the xml parser can`t except the &. (both openfire 3.3.3 and 3.4). I thought it could help others.
t clear my log and after following your advice and davids I checked the permissions of the log files and the root user owned them. I changed it to daemon and now it works fine. (openfire 3.3.3 rpm on centOS4 VPS). Isn`t it suppose to be owned by daemon at the first place?