Got it working. After comparing the exact differences between the external jetty server, which works, and the embedded configuration, I was able to get this to work. It required a little trial and error and its not altogether obvious, so I'm sharing what I did for others.
First, the ONLY jetty jar I needed in WEB-INF/lib is this one:
jetty-util-8.1.12.v20130726.jar
All the others I have in the outside for the embedded container. Even though this jar was present in the servers classpath, the app would not load. The only way it would work is if I added only that jar to the /lib dir. That led me to the next error:
java.lang.IllegalStateException: Websockets not supported on blocking connectors
at org.eclipse.jetty.websocket.WebSocketFactory.upgrade(WebSocketFactory.java:237)
at org.eclipse.jetty.websocket.WebSocketFactory.acceptWebSocket(WebSocketFactory.java:396)
at org.cometd.websocket.server.WebSocketTransport.handle(WebSocketTransport.java:157)
Notice it gets past the NPE, which is progress. So then by looking at the log line in the other working jetty server, and a little reading on non-blocking connectors, I used this connector instead of the SocketConector:
import org.eclipse.jetty.server.nio.SelectChannelConnector;
. . .
SelectChannelConnector connector = new SelectChannelConnector();
Those two very simple changes got me up and running.