I installed the Java Runtime SDK 10.1 pre-release on Windows 7 and this "ARCGISRUNTIMESDKJAVA_1_0" environment variable did not get set up at all.
All it did was keep me from running the samples right out of the box from the shortcut put in the programs menu. It is a minor nuisance once I recognized it. I set one up and the sample jar ran fine after that.
It happened to a coworker as well. So it is not an isolated case, but just in case anyone else runs into it. Just set the variable to your path. Mine was "C:\Program Files (x86)\ArcGIS SDKs\Java1.0"
I don't know if it was intentional or not (i.e., by design) to not set that. I deduced it from the error running the jar via the java -jar <jar filename> at a command/shell prompt.
Hope that helps someone looking for answers... Does this belong in a different forum? (please feel free to move it) I never can tell, I rarely post.