Tested build: jdk7 b127-pit http://rehudson.sfbay.sun.com/hudsonws/deploypit/bundles/windows-i586/b255-2011-01-20_29/
Tested OS: winxp x86
Tested browser: IE8

Steps to reproduce
1) Open the following applet with java console open
http://rehte.cn.oracle.com:8080/wshost/new_ws/deployment/src/plugin/HeapConsideration/HeapConsideration/html/ThreadProducerMaxCount.html, it has <param name="java_arguments" value="-Ddeployment.system.maxAppletThreadCount=20" /> element. It will produce 30 threads
2) wait about 10 seconds. it will open another applet.
4) if there is only one vm, bug is reproduced
Souce code:
http://rehte.cn.oracle.com:8080/wshost/new_ws/deployment/src/plugin/HeapConsideration/HeapConsideration/src/
The test case url: http://rehte.cn.oracle.com:8080/wshost/new_ws/deployment/src/plugin/HeapConsideration/HeapConsideration/html/ThreadProducerMaxCount.html

does not works.
Also, 'deployment.system.maxAppletThreadCount is a system deployment configuration to be specified in deployement.properties file.
It is not meant to be read through individual applet param java. So, please change the test and if it does work, please also close the bug.