I can tell you this issue only concerns LPE and the other LW 5 versions. LW 4 seems to run fine even with Java 7 set as the main Java on Windows XP.
But I see what you mean on XP, even if you set Java 6 as the enabled Java, if Java 7 exists on the system then LW 5 refuses to run.

File_Girl is very short on spare time but hopefully she might be able to help. But it might be some time away.

If I had her skills, I'd rip LPE apart and replace certain parts with LW 4's code lol. LW 5's upload technology is whacky and very buggy.
You would not want to see my bug report on LPE in the LPE thread or it would scare you. lol