Microsoft Internet Explorer's applet security settings are intended for the Microsoft Java virtual machine, not Mac OS Runtime for Java (MRJ).
To change the settings for MRJ, use Apple Applet Runner, which is part of the MRJ 2.1 SDK. Apple Applet Runner has a user interface to change the properties file which controls the global security restrictions used in MRJ. To get to the properties dialog, select "Properties" from the "File" menu in Apple Applet Runner.
Apple Applet Runner is installed as part of MRJ 2.0 in the Apple Applet Folder in the Mac OS Runtime for Java folder in the Apple Extras folder. MRJ 2.1 does not install Apple Applet Runner. If Apple Applet Runner is missing, download the SDK from:
ftp://ftp.apple.com/developer/Development_Kits/MRJ_SDK_2.1.sit.hqx