Well, I would try to completely remove the old Java from the control panel --> add/remove programs.
When all things with "Java" in the name are removed, go to www.java.com
and follow the download link on top of the page.
Now, my Firefox usually complains about Java not being compatible whenever it updates itself. I have never had a problem with running any Java programs from websites through Firefox though... So I'm not sure what the error message is about.
Is there a certain application or website you are trying to view and it craps out on you? Besides trying to get to it by the icon in the control panel, what other problems are you having with Java?