For SUN JDK, they are loaded as an in-process ActiveX control, IOW, a DLL, into browser's address space.
Second, the version of Java was the only different variable between Andread's setup and the original one. Not that it matters - it really should be irrelevant. But, who knows. I can see that applet's painting hanging, and, since all painting is done on one thread, leaving the window unpainted. Not a likely scenario, just barely possible.