(Eclipse 3.4, Ganymede)
I have an existing Dynamic Web Application project in Eclipse. When I created the project, I specified \'Default configuration for Apache Tomcat
You can try to uncheck the facet, apply, change the value of the facet and check. It works for me in Eclipse Helios SR1.
So the main difference is that I do it with 'Dynamic Web Module'.
I hope it works for you too.