FULL PRODUCT VERSION :
java version "1.7.0"
Java(TM) SE Runtime Environment (build 1.7.0-b147)
Java HotSpot(TM) Client VM (build 21.0-b17, mixed mode, sharing)

ADDITIONAL OS VERSION INFORMATION :
Microsoft Windows [Version 6.1.7601]  (Windows 7 SP1, 64bit)

EXTRA RELEVANT SYSTEM CONFIGURATION :
32-bit IE9 and 32-bit Java

A DESCRIPTION OF THE PROBLEM :
Loading a page with an applet will randomly fail to work. From the logfile it looks like the plugin part fails to communicate with the JVM (browser plugin crashed?).

Firefox 4 and 5 did not have this problem on the same machine. Reverting to Java6 makes it work again in IE9. Also tested on Vista/IE8 and there it also works for me.
Was repeatable on a second windows7/IE9 machine.

REGRESSION.  Last worked in version 6u26

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Load/Reload the page a few times (5-10 times max).
Enabling trace/logging seems to make it easier to trigger (looks like a race condition).

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
No crash.
ACTUAL -
Browser reports "A problem with this webpage caused Internet Explorer to close and reopen the tab" and reloads the page, or sometimes closes it.
I did have a hs_err_pid*.log file but am unsure if that was from testing this. Removed it but were unable to generate a new one so probably not.

ERROR MESSAGES/STACK TRACES THAT OCCUR :
Log started: on, 3 aug 2011 12:26:30 +0200
Detected from bootclasspath: C:\\PROGRA~2\\Java\\jre7\\lib\\deploy.jar
security: property package.access value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.
security: property package.access new value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws
security: property package.access value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws
security: property package.access new value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws,com.sun.deploy
security: property package.access value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws,com.sun.deploy
security: property package.access new value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws,com.sun.deploy,com.sun.jnlp
security: property package.definition value null
security: property package.definition new value com.sun.javaws
security: property package.definition value com.sun.javaws
security: property package.definition new value com.sun.javaws,com.sun.deploy
security: property package.definition value com.sun.javaws,com.sun.deploy
security: property package.definition new value com.sun.javaws,com.sun.deploy,com.sun.jnlp
security: property package.access value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws,com.sun.deploy,com.sun.jnlp
security: property package.access new value sun.,com.sun.xml.internal.ws.,com.sun.xml.internal.bind.,com.sun.imageio.,com.sun.javaws,com.sun.deploy,com.sun.jnlp,org.mozilla.jss
security: property package.definition value com.sun.javaws,com.sun.deploy,com.sun.jnlp
security: property package.definition new value com.sun.javaws,com.sun.deploy,com.sun.jnlp,org.mozilla.jss
basic: Added progress listener: sun.plugin.util.ProgressMonitorAdapter@b1a0f9
network: Cache entry not found [url: http://10.10.120.126:8080/phoenix/ts/sysreq/aa/, version: null]
network: Cache entry found [url: http://10.10.120.126:8080/phoenix/ts/sysreq/aa/Java7.class, version: null] prevalidated=false/0
network: Connecting http://10.10.120.126:8080/phoenix/ts/sysreq/aa/Java7.class with proxy=DIRECT
network: Connecting http://10.10.120.126:8080/ with proxy=DIRECT
network: ResponseCode for http://10.10.120.126:8080/phoenix/ts/sysreq/aa/Java7.class : 304
network: Encoding for http://10.10.120.126:8080/phoenix/ts/sysreq/aa/Java7.class : null
network: Disconnect connection to http://10.10.120.126:8080/phoenix/ts/sysreq/aa/Java7.class
network: Cache entry not found [url: http://10.10.120.126:8080/phoenix/ts/sysreq/aa/, version: null]
basic: Applet loaded.
basic: Applet resized and added to parent container
basic: PERF: AppletExecutionRunnable - applet.init() BEGIN ; jvmLaunch dt 448759 us, pluginInit dt 3280525 us, TotalTime: 3729284 us
sysreq - init22 done!
basic: Applet initialized
basic: Starting applet
basic: completed perf rollup
basic: Applet made visible
basic: Applet started
basic: Told clients applet is started
basic: Starting applet teardown
basic: Finished applet teardown
plugin2manager.parentwindowDispose
basic: Removed progress listener: sun.plugin.util.ProgressMonitorAdapter@b1a0f9
basic: JVM[id=1]-Heartbeat heartbeat dead, exception. dT=4 seconds.
java.lang.InterruptedException
	at java.lang.Object.wait(Native Method)
	at sun.plugin2.message.Queue.waitForMessage(Unknown Source)
	at sun.plugin2.message.Pipe.receive(Unknown Source)
	at sun.plugin2.main.server.HeartbeatThread.run(Unknown Source)


REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
Files available on: http://beta.enlight.net/~puw/java7/java7.html

java7.html:
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0//EN" "http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
  <title>Java 7 Applet Test Page</title>
</head>

<body>

  <applet code="Java7">
  </applet>

</body>
</html>

Java7.java:
import java.applet.*;

public class Java7 extends Applet
{
    public void init()
    {
	System.err.println("sysreq - init22 done!");
    }
}

---------- END SOURCE ----------

CUSTOMER SUBMITTED WORKAROUND :
Removing the doctype stops the crashes, it changes IE9 to use quirks mode and I guess it does something differently with regard to plugins. This whole thing could be an IE bug.