Spent quite a bit of time today to get things set up. I keep running into weird issues with it.
Here is what I found:
MachII needs to be installed in a folder that is pointed to in your custom path.
So if you put it in c:\Websites\MachII, then the custom search path should be c:\Websites.
Don't count on the component being discovered via current directory (that is, don't install it in the directory where your webpages reside). It won't work because some nested components are still referencing it. So basically it relies on an absolute pathing component name resolution.
Also, JRun seems to keep referencing the old component even after you change path (probably cached somewhere). It didn't become clear until after I turned on the debugging. Anyways, the only way I found to get the JRun server pick up the new changes when I move MachII folder around is to restart JRun. Update: Changing the mach-ii.xml is enough to force a config reload, which will in turn recreate the application objects.
Be sure to turn off the caching while developing code so JRun picks up the new changes too.
Install it in a central location somewhere so all MachII application will reference it.