Since moving to ADK14, I have been unable to build new apks for release on my Windows 7 system.
Building fails with \"conversion to dalvik format failed with error 1
This error occurs when you use a .jar file that is not using any feature of Java 6 or higher but was built using Java 6 or higher, according to informIT.com. Apparently, Google doesn't include JDK 7 in Android's system requirements.
So the solution, that worked for me is very simple.
Build the .jar file using Java 5 or less.