Rather than seeing a separate folder for each webapplication, all webapp files are jumbled together in the top level folder. The problem seems to be that the maven-war-plugin is not copying the webapps properly to that folder.
(2) Manually copy the webapps from their [dspace-src]/dspace/modules/[webapp-name]/target/ directory. So, for example, the XMLUI webapp is built properly to the path: [dspace-src]/dspace/modules/xmlui/target/xmlui-1.7.0/ If you manually copy the webapp to the proper location, everything should work fine.
For the time being, this is a "known issue" with DSpace 1.7.0. The developers will need to determine if we should continue to support Maven 2.0.x, or if we require an upgrade to Maven 2.2.x or above.