I have figured out how to disable the auto update in the registry for Java 6 Update 6 & 7 (may work for other version 6 updates as well). This would have to be run once for each user that logs in so hopefullly that will work for you. You need to creare a REG_BINARY value named EnableAutoUpdateCheck at HKCU\Software\Javasoft\Java Update\Policy. Binary values are a pain to type out so I exported the above referenced key to a .reg file. You can just cut & paste all of the text below into a new text file & save it with a .reg extension. Let me know if this is OK for you.
Windows Registry Editor Version 5.00
[HKEY_CURRENT_USER\Software\JavaSoft\Java Update\Policy]
"LastUpdateBeginTime"="Mon, 18 Aug 2008 23:50:09 GMT"
"LastUpdateFinishTime"="Mon, 18 Aug 2008 23:50:09 GMT"
"EnableAutoUpdateCheck"=hex:01,00,00,00,d0,8c,9d,df,01,15,d1,11,8c,7a,00,c0,4f,\
c2,97,eb,01,00,00,00,f1,16,d5,ae,ca,94,ba,40,a6,87,a1,e7,02,30,7f,51,00,00,\
00,00,1c,00,00,00,50,00,61,00,73,00,73,00,77,00,6f,00,72,00,64,00,20,00,44,\
00,61,00,74,00,61,00,00,00,03,66,00,00,a8,00,00,00,10,00,00,00,94,22,62,3b,\
69,4e,b9,06,5e,d3,de,7a,f0,b9,71,0b,00,00,00,00,04,80,00,00,a0,00,00,00,10,\
00,00,00,95,79,37,d4,8c,9a,d9,5d,61,ae,96,bd,3f,07,d8,bf,08,00,00,00,e0,f6,\
9e,f8,99,64,3c,8c,14,00,00,00,5d,99,b3,71,5d,a4,12,e3,9c,fd,a0,3a,b5,f6,82,\
22,80,52,21,0e