Check that Xerces exists in:
$JAVA_HOME/lib/endorsed
Sounds like a Java 5 issue. Also check the Java system property for:
javax.xml.parsers.SAXParserFactory
It should be:
org.apache.xerces.jaxp.SAXParserFactoryImpl
If not then that's your issue, make sure you set the system property.
This happened to me. I had conflicting JARs in my workspace. I removed one and boom it worked. The message didn't lend very well to the root of the error.
My SAXParserFactoryImpl problem was caused by gwt-gadgets.jar I had in my boot class path. Removing this JAR from the boot class path solved the problem for me. Basically you have to remove any JAR containing a SAXParserFactoryImpl class from your build path (user libs).