I had this same issue, wanting to configure the logging levels of Tomcat 7 in Eclipse WTP. I tried putting a logging.properties in the /src directory of my web app. No effect. I tried modifying the logging.properties file in the /conf directory of my Tomcat installation, but no effect there either. I discovered Eclipse WTP's "shadow" Tomcat area, under my workspace directory, in .metadata/.plugins/org.eclipse.wst.server.core/tmp0, and put a logging.properties file in the /conf directory under there. No effect.
I discovered a number of articles (e.g., this FAQ at eclipse.org) noting that while Tomcat in "real life" automatically runs with a logging manager called "JULI", for some reason the Tomcat running inside Eclipse WTP does not run with JULI. I tried adding
-Djava.util.logging.manager=org.apache.juli.ClassLoaderLogManager
to the VM args in my Tomcat run config, but that just got me ClassNotFound errors. (And yes, I did have tomcat-juli.jar in my classpath, so no idea why it wasn't finding it.)
Finally, it occurred to me to try modifying the logging.properties instance in my jdk jre/lib. Jackpot! It turns out that's the one that does have an effect on the logging done by Tomcat-in-Eclipse. So, the moral of this long tale is that if all you want to do is just simply configure the logging while you're running in Eclipse, with a simple little statement like:
myapp.mypackage.level=FINE
Then $JAVAHOME/lib/logging.properties is the place to put it.