It turns out that the older version of xstream (1.3.x) are not compatible with Java 7. (Google "java 7 xstream" to see details).
So, I have changed the default classpath of the jreality SVN project to use the newer jars (xstream-1.4.3.jar and xpp3-1.1.4c.jar) instead of the older versions (named simply xstream.jar and xpp3.jar).
Please report any problems with these newer jars on this thread.
new xstream and xpp3 jar files in classpath
new xstream and xpp3 jar files in classpath
jReality core developer