There's a java.exe in the Windows system directory (C:\WINNT\system32 on
my Win2000 system). This directory normally *is* included in the PATH
environment variable. In general this java.exe is exactly the same as
the java.exe in the JRE\bin folder (it's put there by the Java
installer, like some others: javaw.exe, javaws.exe, jpicpl32.cpl).

When the java.exe starts, it tries to establish the location of the
runtime environment. The C source of this launcher is available in the
src.zip (if you have the SDK installed): java_md.c (_md stands for
"machine dependent", in this case it's for the Windows OS).

Looking at the 1.5.0_04 source, java.exe first tries to find the path to
JRE based on .exe's location (checking if ..\bin\java.dll or
..\jre\bin\java.dll exist), and then --if it fails-- on some Windows
registry entries.

When the java.exe of a JRE is invoked, for example C:\Program
Files\Java\jre1.5.0\bin\java.exe, it will find java.dll in the same
directory (..\bin\java.dll) and JRE home is established as C:\Program
Files\Java\jre1.5.0.
When the java.exe of a *JDK* is invoked, e.g. C:\Program
Files\Java\jdk1.5.0\bin\java.exe, java.dll is not located in the same
directory, but in C:\Program Files\Java\jdk1.5.0\jre\bin, and therefore
JRE home is established as C:\Program Files\Java\jdk1.5.0\jre.

Now, when the java.exe in the windows system directory is invoked, e.g.
C:\WINNT\system32\java.exe, (normally) there's neither a C:\WINNT\bin\
nor a C:\WINNT\jre\bin\ folder (and no java.dll), and the java.exe
launcher uses the second way --examining some Windows registry entries--
to establish the location of the runtime environment. The primary entry
that it checks is HKEY_LOCAL_MACHINE\Software\JavaSoft\Java Runtime
Environment\CurrentVersion. If that does not match the value that is
hardcoded in java.exe (this hardcoded value will of course match the
installed JRE/JDK version), it will generate an error message like the
following:

Registry key 'Software\JavaSoft\Java Runtime Environment\CurrentVersion'
has value '1.5', but '1.6' is required.
Error: could not find java.dll
Error: could not find Java 2 Runtime Environment.

So when you ask how to change the version of the java launcher that is
installed in the windows system directory, I would say don't (unless you
need to repair it). When you need to invoke a specific version, use the
full path to the JRE\bin\java.exe (or javaw.exe). The launcher will find
the correct runtime environment automagically.

I discovered two ways of accomplishing that.

One is to put a dummy java.exe in C:\windowsNT which is on the path
which then looks in the registry to find out where the real java.exe
is. Actually nowadays, it is the same code for dummy and real.

The second is to put an entry in:

HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\App
Paths\firefox.exe(default)
=
E:\Program Files\Firefox\firefox.exe

HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\App
Paths\firefox.exe(path)
=
E:\Program Files\Firefox\

This lets you put something on the path and define its starting
directory without cluttering up the path.

IRRC Java.exe uses the first method and javaws.exe uses the second.