Found it:
The embedded tomcats (6.0.x and 7.0.x) in vfabric-tc-server-developer are provided with tomcats tomcat-juli-adapters.jar tomcat-juli.jar jars by default under:
%TCSERVER_HOME%\tomcat-7.0.X\bin\extras and %TCSERVER_HOME%\tomcat-7.0.X\bin
So your log4j configuration should go under your instance conf dir.
Then you should make sure you delete/rename the exiting logging.properties file.
Now you should not see the fault message above and you will start to see tomcat related logs.
I tested this under tc-server versions 2.7.0 and 2.9.2