5.0u6+ (b04) Auto-update popup dialog is displayed after jre install with "JAVAUPDATE=0"

Test-spec => http://jqa.ireland/j2se/test-procedures/rfe6362626/RFE6362626-testspec.html

Installed jre on test system using bundles from following location: /java/re/jdk/1.5.0_06-plus/promoted/fcs/b04/bundles

Actual jre used => jre-1_5_0_06-fcs-bin-b05-windows-i586-p-27_feb_2006.exe
Installed from commandline as follows:
#./jre-1_5_0_06-fcs-bin-b05-windows-i586-p-27_feb_2006.exe "/V JAVAUPDATE=0"

Executed the following testcase from above mentioned test-spec:
1. Install 5.0u6plus JRE using "JAVAUPDATE=0" commandline option
2. Reboot and confirm jusched.exe is NOT running
3. Launch Java Control Panel and select the 'Update' tab
4. Confirm checkbox for "Check for update automatically" is NOT checked
5. Close Java Control Panel
6. Launch browser and visit any applet web page
7. Confirm Applet starts successfully and no auto-update popup dialog is displayed
8. Launch Java Control Panel and select the 'Update' tab
9 Confirm checkbox for "Check for update automatically" is now checked

Step 7 is failing. An "Auto-update popup dialog" IS display when it should not have been.

I loaded the following applet into IE: http://www.ibdprince.com/java.shtml
I have attached a pic of the auto-dialog popup (in .bmp format).

If I install the jre (from the 5.0u6+ (b02) and run the testcase everything is fine.