For the most part, Window.setLocationRelativeTo() works properly on secondary screens. What doesn't work is if the a Window is being positioned relative to a Component which is partially off the bottom edge of a secondary screen. On primary screens, the Window is placed beside the Component (which is according to spec). On secondary monitors, though, the Window is placed on top of the Component instead.

The following test case reproduces the problem. Drag the Frame so it runs off the bottom of a secondary screen, and click the "Show Dialog" button. The Dialog will be placed on top of the Frame instead of beside it.
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// Test to show that Window.setLocationRelativeTo() is not multi-screen aware

import java.awt.*;
import java.awt.event.*;

public class RelativeTo extends Frame implements ActionListener {
    Dialog theDialog;
    Button showDlgBtn;

    public RelativeTo() {
        super("RelativeTo");
        theDialog = new Dialog(this, "RelativeDialog", false);
        theDialog.setSize(200, 200);

        showDlgBtn = new Button("Show Dialog");
        showDlgBtn.addActionListener(this);
        add(showDlgBtn);
        setSize(300, 300);
    }

    public void actionPerformed(ActionEvent e) {
        theDialog.setVisible(false);
        theDialog.setLocationRelativeTo(this);
        theDialog.setVisible(true);
    }

    public static void main(String[] args) {
        RelativeTo f = new RelativeTo();
        f.show();
    }
}