Please try the following commands at the command linePlease check your system PATH; the JDK installation folder ought to be before anything else which might contain the java tool. So it needs to be before Windows and System32 and system 64.
Your PATH probably has two versions of Java in it, 6 and 7. The Java 6 version occurs first in the path, so it's found first. But it's incomplete - probably it's a JRE rather than a JDK - so while it has a java.exe, it doesn't hava a javac.exe. So when your system looks for java.exe, it finds version 6, but when it looks for javac.exe, it finds version 7.
Preferred solution: edit your PATH to remove references to the Java 6 installation, keeping only the Java 7 info. Or (as Campbell said) just make sure the Java 7 stuff is listed before everything else. It won't matter if there are other versions of Java, as long as your preferred version is listed first in the PATH.
That looks good - I don't know what would be wrong with it, assuming that directory exists exactly as you've written it. Is it possible you are still using the original command window? You need to exit and re-open the window after changing the PATH (or any system variable), in order to see its effect. Other than that, I have no idea. Perhaps a more windows-savvy rancher can help you.