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Ok, problem solved. The earlier issue was a properties file that was created as root (I notice that openfire runs under its own userid - openfire so doing a chown openfire on this file solved that problem, but when openfire came up it still didn't run as Java 1.6. I did solve this issue (see below)
To recap, there is some issue with the 1.5.0 version of the JDK which causes the original fault in the title - this I can't fix, but the problem does not occur when running under Java 1.6. To get openfire to run under 1.6 you would normally just download it from Apple (there is an update for OS X 1.5.x - but only for Intel Macs) and then you need to select this JVM as the default (otherwise 1.5.0 is still used). You change the default using the Java Preferences tool in Applications/Utilities/Java. Unfortunately the openfire-launchd-wrapper.sh file (in /usr/local/openfire/bin/extra) ignores the default so you need to edit this file. Change the definition of JAVA_HOME to:
export JAVA_HOME=/System/Library/Frameworks/JavaVM.framework/Home
and change the invocation line to:
$JAVA_HOME/bin/java -server -jar "$OPENFIRE_HOME/lib/startup.jar" -Dopenfire.lib.dir=/usr/local/openfire/lib&
and now it will obey the Java preferences settings and run in which ever JVM you have defined as preferred. Of course you can also leave the default as 1.5 and change the behavior for just openfire by setting the JAVA_HOME definition listed above to:
export JAVA_HOME=/System/Library/Frameworks/JavaVM.framework/Versions/1.6/Home
instead (you still need to change the invocation line to use $JAVA_HOME though).
I hope this helps some other poor schmuck 
Wolf.