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The cause is that the applet is running with Java 7 installation. The applet does not read the version number correctly and believes that it is running with Jinitiator, and the wrong version at that. The version of Java that is used by the applet is determined by the installation order. Install 7 last and the applet is going to run with 7.
I am not sure if that is something you can configure with R12. You can make changes in the Java Control Panel that will affect which JRE is used. The 7 plugin can run the 6 JRE. See: