I am sorry about not providing sample code. Given below is what I am
doing.

In JApplet,
public void init() {
//some stuff...
scroller = new JScrollPane();
scroller.setOpaque(true);
scroller.getViewport().add(new MyJPanel());
scroller.setPreferredSize(new Dimension(800, 600));
getContentPane().add(scroller, BorderLayout.CENTER);
setVisible(true);
validate();
}

In MyJPanel,
public void paint(Graphics g) {
Dimension area = new Dimension(0,0);
Rectangle rect = new Rectangle(x,y,IMGW,IMGH);
g2d.drawImage(img,x,y,IMGW,IMGH,this);
scrollRectToVisible(rect);
int this_width = (x + W + 5);
if (this_width > area.width) {
    area.width = this_width;
    changed=true;
}
int this_height = (y + H + 50);
if (this_height > area.height) {
   area.height = this_height;
   changed=true;
}
if (changed) {
   setPreferredSize(area);
   scrollRectToVisible(new Rectangle(area.width, area.height, IMGW,
IMGH));
   revalidate();
}

public void mouseDragged(MouseEvent e) {
   x = e.getX();
   y = e.getY();
   /// some stuff...
   // Dimension d stores the current dimensions of the BufferedImage
   Rectangle r = new Rectangle(d.width-600, d.height-400,
d.width+100, d.height+100);
  ((JPanel)e.getSource()).scrollRectToVisible(r);
  repaint();
}
public void mouseMoved(MouseEvent e) {
   // some stuff...
    repaint();
}

Once again, my problem is:
1) When I drag the image such that scrollbars appear, the display area
starts flickering. Other than the (stable)scrollbars already visible,
there is another set of scrollbars visible flickering in the middle of
the display.
2) The scrollbars fix the image at the rightmost lower corner and when
I try to move the scrollbars back or up, they move and then instantly
snap back to the original rightmost lower corner. Hence, not allowing
me to see anything other than the rightmost lower corner.

Please help.
Thanks,
losttemp