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Java 7 update 21 ignoring system wide config files

1013228Jun 6 2013 — edited Jul 18 2013
I am upgrading from java 6u25 to java 7u21.
My installation process removes 6u25, installs 7u21 and creates the deployment.config and deployment.properties files under "C:\Windows\Sun\Java\Deployment".
After i installed java, and tried to access the "Do I have java" utility on java.com, I found that all the settings in deployment.properties are being ignored (specifically proxy settings).
the contents of my files are as follows:

DEPLOYMENT.CONFIG:
deployment.system.config=file\:c\:\\Windows\\Sun\\Java\\Deployment\\Deployment.Properties
deployment.system.config.mandatory=true

DEPLOYMENT.PROPERTIES
#deployment.properties
#Wed Jun 05 10:52:47 EDT 2013
deployment.javaws.viewer.bounds=1800,171,720,360
deployment.version=7.21
deployment.browser.path=C\:\\Program Files (x86)\\Internet Explorer\\iexplore.exe
deployment.proxy.type=2
deployment.proxy.http.host=MYPROXYHOST
deployment.modified.timestamp=1370443967698
deployment.proxy.auto.config.url=http\://wpad/wpad.dat
deployment.javaws.shortcut=ALWAYS_IF_HINTED
deployment.capture.mime.types=true
deployment.proxy.http.port=80
#Java Deployment jre's
#Wed Jun 05 10:52:47 EDT 2013
deployment.javaws.jre.0.registered=true
deployment.javaws.jre.0.platform=1.7
deployment.javaws.jre.0.osname=Windows
deployment.javaws.jre.0.path=C\:\\Program Files (x86)\\Java\\jre7\\bin\\javaw.exe
deployment.javaws.jre.0.product=1.7.0_21
deployment.javaws.jre.0.osarch=x86
deployment.javaws.jre.0.location=http\://java.sun.com/products/autodl/j2se
deployment.javaws.jre.0.enabled=true
deployment.javaws.jre.0.args=

If I re-install java 6u25, everything goes back to working.

Has anyone else encountered this issue and found a fix?

We need to deploy this update to approx 1700 systems.

Thanks
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Locked on Aug 15 2013
Added on Jun 6 2013
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