I just got confirmation from the #jboss IRC channel that you can not have per-deployment configuration of logs in 7.0 if you use the jboss-logmanager mechanism. This means that to configure logging you need to do it in either standalone.xml or use the JBoss administration console. I was told it should be ready in 7.1.
If you truly need per-deployment logging configuration, you can use the log4j bindings for slf4j, which worked for me. You still get the strange "double log formatting" but you can at least write it to a file and control the logging level instead of going to the console.
I also had a problem loading the xugger demos, but that's OK, but I think everything is set now for me.