I am facing this problem since more than a month, here is what I see when I run java on command line:
$ java -Xmx1300m
Error occurred during initialization
Thanks.I changed heap space from 2000MB to 1024MB and it worked...
Eureka ! Finally I found a solution on this.
This is caused by Windows update that stops any 32-bit processes from consuming more than 1200 MB on a 64-bit machine. The only way you can repair this is by using the System Restore option on Win 7.
Start >> All Programs >> Accessories >> System Tools >> System Restore.
And then restore to a date on which your Java worked fine. This worked for me. What is surprising here is Windows still pushes system updates under the name of "Critical Updates" even when you disable all windows updates. ^&%)#* Windows :-)