I have an applet that requires the java security setting to be on medium. I go into the control panel and change the setting. I hit apply. Then exit the Java control panel. To check if the change stuck, I go in again and check the setting. It is indeed on medium. However, as soon as I download my applet into the browser, the setting changes the security setting back to high. The applet is build on a very early version of 1.6 build 29. I don't know if this makes a difference or not.
ive had this problem before. first uninstall all the older versions of java. Then look for the offline installer package on the java website. run it and install it as normal and then check for updates and download those. for some reason the offline package seemed to work better for me. I hope the same for you.
Hope this helps- Hunter