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What's your windows version? Do you have some other java visible from your path envrionment variable?
I have the same problem with Windows XP, the installation hangs at 2% with the same error above. I deinstalled my Java VM to let Oracle install its 1.4 version but still hangs.
Have you checked the integrity of your install media?
I have also made some investigation, but I have not found something meanigful on this issue. Similar problems end up in a dead end.
What is your OS version (XP/2003/64-bit Itanium etc)? you installing 32-bit or 64-bit oracle ?
Give a try to following work around
install j2sdk-1_4_2_14 ( or upper) and run
runInstaller -jreLoc <path of j2sdk1.4.2_14\jre\>
An update on this issue, further investigation on this topic show it is due to corruption on the jar install files.
This helped me solve a problem installing the software hangs Oracle 10gR2 on AIX 5.3 server:
+./runInstaller -jreLoc /usr/java14/jre+