On going to the Java site and verifying my Java version I got the message:
You have the recommended Java installed (Version 6 Update 22)
So it checked my Java version (32/64) against my OS and said "OK".
Looking at this problem I see a lot of people have been affected with various solutions eg this forum:
I tried a few solutions but not yet the complete registry deletions and reinstall of Java.
Still works with Firefox so maybe I stay with FF. Pity IE8 can't get to grips with Java, after all Java applets are still very widely used.