Newer JREs are not registering old JRE ClassIDs for all users
For application compatibility, versions of the JRE (6.0 Update 31 and earlier) would register version specific Class IDs for versions of the JRE that were not installed and pointed them to the current version of the JRE. These are registered in the user’s registry under the HKCU\Software\Classes\CLSID key. Every time the user launches IE, the JRE would validate these keys exist and are set appropriately.
Newer versions of JRE 6.0 and 7.0 no longer register the previous JRE class IDs when launching IE. It only does this during the install process. This causes an issue for other user accounts on the PC. Corporate PCs typically have software installed with a different account than the one the user logs on with. Web applications that were developed for an earlier version of Java no longer function when this occurs. Its not a compatibility issue with the JRE itself, it just that IE cannot find the object being called in the HTML. This makes the guidance in the following support docs unusable. Unless of course, you happen to be the account that installed the JRE.
http://docs.oracle.com/javase/1.5.0/docs/guide/plugin/developer_guide/using_tags.html
http://www.oracle.com/technetwork/java/javase/family-clsid-140615.html
This appears to be a bug. Previous functionality is lost. To resolve the issue we have to import the registry keys ourself, recode the applications, or install back level vulnerable versions of JRE.
Please fix this in the next release.