To get a clear timeline of events:

1) LimeWire downloads files fine.
2) Java is upgraded.
3) LimeWire fails downloading files.

Is that the order?

Or is the order:

A) LimeWire downloads files fine.
B) LimeWire fails downloading files.
C) Java is upgraded.
D) LimeWire still fails downloading files.

I can't quite tell from your post.

Try going to Tools -> Options, choosing 'Saving' and changing your 'Save Directory'.