I have the identical problem. I tried running the setup.exe from the win32 directory, and the wizard does start, however, it fails the prerequisite check for the OS and does not allow me to ignore and continue. Running the setup.exe from the win64 directory, or from the Disk1 directory yields the same error as the OP above.
You should have your java_home\bin directory in your path. You can check to ensure that this is set right by opening a command prompt and typing java -version. If this fails, or returns the wrong version, your path is not set right. Also, you can set the environment variable JAVA_HOME to the directory where java is installed, ex. c:\Program Files\Java\jdk1.6.0_23. From your error message, though, it sounds like java is not installed where the installer thinks it is?
Hope that helps!
We had a similar problem when running the install on Windows 7. We raised an SR and Oracle confirmed that although the installer and pre-requisite check fail (due to Windows7 not being a compatible OS) you can ignore the error and continue as the client IS certified on Wind7 32 and 64 bit.