Ok some background information first.
I am using minecraftforge-universal-4.1.1.251.zip, the more recent version fails to start the server at all.
I have installed the forge client into the minecraft_server.jar as instructed and this is the set of errors that I get on the server console as it tries to load.
2012-10-19 18:58:07 [iNFO] [ForgeModLoader] Forge Mod Loader version 3.0.196.366 for Minecraft client:1.3.2, server:1.3.2 loading
2012-10-19 18:58:07 [iNFO] [sTDERR] Exception in thread "main" java.lang.RuntimeException: java.lang.NoClassDefFoundError: cpw/mods/fml/common/FMLLog
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.FMLRelauncher.setupHome(FMLRelauncher.java:163)
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.FMLRelauncher.relaunchServer(FMLRelauncher.java:121)
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.FMLRelauncher.handleServerRelaunch(FMLRelauncher.java:33)
2012-10-19 18:58:07 [iNFO] [sTDERR] at net.minecraft.server.MinecraftServer.main(MinecraftServer.java:1258)
2012-10-19 18:58:07 [iNFO] [sTDERR] Caused by: java.lang.NoClassDefFoundError: cpw/mods/fml/common/FMLLog
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.Downloader.updateProgressString(Downloader.java:99)
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.RelaunchLibraryManager.handleLaunch(RelaunchLibraryManager.java:64)
2012-10-19 18:58:07 [iNFO] [sTDERR] at cpw.mods.fml.relauncher.FMLRelauncher.setupHome(FMLRelauncher.java:143)
2012-10-19 18:58:07 [iNFO] [sTDERR] ... 3 more
2012-10-19 18:58:07 [iNFO] [sTDERR] Caused by: java.lang.ClassNotFoundException: cpw.mods.fml.common.FMLLog
2012-10-19 18:58:07 [iNFO] [sTDERR] at java.net.URLClassLoader$1.run(URLClassLoader.java:217)
2012-10-19 18:58:07 [iNFO] [sTDERR] at java.security.AccessController.doPrivileged(Native Method)
2012-10-19 18:58:07 [iNFO] [sTDERR] at java.net.URLClassLoader.findClass(URLClassLoader.java:205)
2012-10-19 18:58:07 [iNFO] [sTDERR] at java.lang.ClassLoader.loadClass(ClassLoader.java:321)
2012-10-19 18:58:07 [iNFO] [sTDERR] at sun.misc.Launcher$AppClassLoader.loadClass(Launcher.java:294)
2012-10-19 18:58:07 [iNFO] [sTDERR] at java.lang.ClassLoader.loadClass(ClassLoader.java:266)
2012-10-19 18:58:07 [iNFO] [sTDERR] ... 6 more
The minecraft_server.jar runs fine before the forge files are placed inside it, once they have been added in the above errors occur. I have tried using Open JDK 6 and 7 both produce the same errors in attempting to get the server to run.
(I have had NO issues in appliying forge to the regular minecraft.jar, it runs perfectly fine.)
Any suggestions here? Or at least point me in the direction of a solution if it's already been found, as I've looked and have been unable to find anything yet.