Problem is actually because of this:
!ENTRY org.eclipse.osgi 4 0 2012-10-25 12:35:43.919
!MESSAGE Bundle org.eclipse.equinox.simpleconfigurator@1:start not found.
So simple configurator is not found. This is causing org.eclipse.core.runtime to not be found.
I suppose this is happen because some osgi or equinox plugins are in one location, and some in another.
config.ini file contain simple configurato bundle specified as: osgi.bundles=org.eclipse.equinox.simpleconfigurator@1\:start
I assume we need to try specify it with full path.