I think its clear that your Java is undamaged since you saw the Island book. The problem is that I already have TWS running so I do not have a pristine set-up as you have,
Go to the Java Plug-in window and enable the java console. Restart IE. Try to run the demo applet again. Copy and paste the event log ifrom the Java Console window. It should tell you where it is hanging up. Send that log to tech support.
I have one final guess. See if you have 128 bit (high) encryption. I'm almost sure you must have it. Go to About Internet Explorer in the Help menu. It will say something like Cipher Strengh 128 bit. (or 56 bit)
Go to the Java Plug-in window and enable the java console. Restart IE. Try to run the demo applet again. Copy and paste the event log ifrom the Java Console window. It should tell you where it is hanging up. Send that log to tech support.
I have one final guess. See if you have 128 bit (high) encryption. I'm almost sure you must have it. Go to About Internet Explorer in the Help menu. It will say something like Cipher Strengh 128 bit. (or 56 bit)