The existence of a database folder (and any files in it), does not indicate that hsqldb is currently in use, but rather that at one point in time it has been in use. The folder is created and maintained automatically when an application is started in the case where the jdbc/Main data source has not been overridden, so assuming you started your application at least once before creating the Configuration.xml file it should be there. As I mentioned, the files in the database folder are actually hsqldb files, which means that if a .properties file exists, it will always mention hsqldb.
To check whether hsqldb is being accessed, start the application in the embedded server, and then refresh the database folder. If 2 additional files, .log and .lck appear, then hsqldb is accessed. Note that once the application is stopped, these files should disappear, and the contents of .log (which contains a log of the database transactions performed in this session) should be merged into the .script file (which contains the persisted database).
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