In the past when I've run into Java issues, the spot where you see "Package Folder" actually shows "Error" so at a glance it sounds like Java is working. When you hit display location what happens? It should pop up a message that says something like "scanning, may take a few minutes". Do you see that or see any errors?
In the Java control panel, under the advanced tab, check all the debugging options and select "show console" so you can see any java errors that are generated. Try adding your software package again and you should see the Java console come up. If you get errors in the Java console about the JAR not meeting security requirements (like security manifest missing), try lowering the Java security settings or adding the URL for your SMP to the exceptoin site list (on the security tab of Java control panel).