The RUNNING.txt that comes with tomcat distribution indicates the use of CATALINA_BASE variable to enable multiple tomcat instance. But how can I set the CATALINA_BASE environment variable for each tomcat instance directory?
Having multiple Tomcat instances on your development machine is great. Here's how I usually do it for Windows (the important parts for setup are in steps 2, 3, 4 and 5):
In the C:\tomcat-1\bin directory, create a file called startup.bat that reads like this:
set CATALINA_BASE=C:\tomcat-1
set CATALINA_HOME=C:\apache-tomcat-6.0.20
C:\apache-tomcat-6.0.20\bin\startup.bat
In the C:\tomcat-1\bin directory, create a file called shutdown.bat that reads like this:
set CATALINA_BASE=C:\tomcat-1
set CATALINA_HOME=C:\apache-tomcat-6.0.20
C:\apache-tomcat-6.0.20\bin\shutdown.bat
OPTIONAL: create a file called setenv.bat in the C:\tomcat-1\bin directory to set any environment variables mentioned in C:\apache-tomcat-6.0.20\bin\catalina.bat. This is the place to set system properties, JPDA addresses, etc.
Try not to install Tomcat in a directory that has spaces in its name. It should work, but you'll experience fewer problems that way. I do not know how this would work if you were using the "tomcat as a service" option for Windows.
From here, you should be able to isolate tomcat instances. Just be sure to edit your conf\server.xml file so that the shutdown ports and HTTP connector ports don't interfere with other Tomcat instances that may be running. I usually assign values like 8005, 8006, 8007, etc. for the shutdown port and 8080, 8081, 8082, etc. for the HTTP connector port.