P3
To reproduce this issue run jpackager from sandbox with following command line below. Note: jars file does not matter in this case. Any will work.
create-image --verbose --input E:\Temp\JNLPConverter\output\jar --output output --name Test2 --version 2.5 --vendor "Alexander (Windows)" --description "JavaApplication1 (Windows) Short" --main-jar JavaApplication1.jar --class javaapplication1.JavaApplication1 --files JavaApplication1.jar --arguments "\\\"Argument 1\\\" \\\"\\\\\\\"Argument 2\\\\\\\"\\\" \\\"\\\\\\\"Argument with \\\\\\\" 3\\\\\\\"\\\"" --jvm-args "-Djnlp.Param1=\\\"Some Param 1\\\" -Djnlp.Param2=\\\"Some \\\\\\\"Param\\\\\\\" 2\\\" -Djnlp.Param3=\\\"Some \\\\\\\"Param\\\\\\\" with \\\\\\\" 3\\\" -Djnlp.TestName=Test2 -Djnlp.Prop1=\\\"Value 1\\\" -Djnlp.Prop2=\\\"Some Value 2\\\" -Djnlp.Prop3=\\\"Some \\\\\\\"Value\\\\\\\" 3\\\" -Djnlp.Prop4=\\\"Some 'Value' 4\\\" -Djnlp.Prop5=\\\"Some \\\\\\\"Value\\\\\\\" 5\\\" -Djnlp.Prop6=\\\"Some \\\\\\\"Value 1\\\\\\\" \\\\\\\"Value 2\\\\\\\" 6\\\" -Djnlp.Prop7=\\\"\\\\\\\"Some \\\\\\\"Value 1\\\\\\\" \\\\\\\"Value 2\\\\\\\" 7\\\\\\\"\\\" -esa -Xnoclassgc -Xms67108864 -Xmx134217728"
create-image --verbose --input E:\Temp\JNLPConverter\output\jar --output output --name Test2 --version 2.5 --vendor "Alexander (Windows)" --description "JavaApplication1 (Windows) Short" --main-jar JavaApplication1.jar --class javaapplication1.JavaApplication1 --files JavaApplication1.jar --arguments "\\\"Argument 1\\\" \\\"\\\\\\\"Argument 2\\\\\\\"\\\" \\\"\\\\\\\"Argument with \\\\\\\" 3\\\\\\\"\\\"" --jvm-args "-Djnlp.Param1=\\\"Some Param 1\\\" -Djnlp.Param2=\\\"Some \\\\\\\"Param\\\\\\\" 2\\\" -Djnlp.Param3=\\\"Some \\\\\\\"Param\\\\\\\" with \\\\\\\" 3\\\" -Djnlp.TestName=Test2 -Djnlp.Prop1=\\\"Value 1\\\" -Djnlp.Prop2=\\\"Some Value 2\\\" -Djnlp.Prop3=\\\"Some \\\\\\\"Value\\\\\\\" 3\\\" -Djnlp.Prop4=\\\"Some 'Value' 4\\\" -Djnlp.Prop5=\\\"Some \\\\\\\"Value\\\\\\\" 5\\\" -Djnlp.Prop6=\\\"Some \\\\\\\"Value 1\\\\\\\" \\\\\\\"Value 2\\\\\\\" 6\\\" -Djnlp.Prop7=\\\"\\\\\\\"Some \\\\\\\"Value 1\\\\\\\" \\\\\\\"Value 2\\\\\\\" 7\\\\\\\"\\\" -esa -Xnoclassgc -Xms67108864 -Xmx134217728"