This has happened since I reinstalled XP pro with the "new" service pack (Java removed) but I have done two things; installed service pack 1 which replaced the original Java in windows (as it was before the legal battle ) and also installed Sun Java console.
The main problem is opening links such as the "more info" on the simply website click here if you click these a small window should open but it does not.
I also use a online database that uses Java and I have been through this with their support staff to no avail - all the internet options and settings on their PC were the same as mine. The only solution seems to be to remove and reinstall IE and then the facility comes back, but only for a short while before stopping again.
Norton Personal Firewall is installed but no other problems and the java applets will still not run even with Norton disabled.