OK - no one else has responded to this thread... so in the lieu of the rest I shall try ... but bear in mind I have never used xp and am limited even in 2000 .... (nothing like crap 'ol '98) !
As a background - dunno if you know or not, apologies if blind teaching the preached - paths are set in '98 using environment variables usually set in autoxec.bat - eg :
PATH=C:\java\jdk1.3\bin;C:\java\jdk1.3\lib
and so on.
I remember at the last work I had, they had NT4, and in "Settings/Control Panel" they had some tab which you could set the environment var's - instead of doing it from autoexec.bat.........as far as I can remember this was the same in 2000, and I GUESS xp - but I can't be sure !!!! Thre should be somewhere in the environment settings a "class" or "classpath" setting which you can edit...
Once there set the point to your java_home directory.
HTH
Ben