We have a bunch of Applets that work fine with JRE 6u29 with both 'Enable the next-generation Java plugin' option checked and unchecked. However, when we moved to JRE 1.7 (and JDK 1.7), the Internet Explorer started hanging while loading the Applets. This happens when the 'Enable the next-generation Java plugin' option is unchecked.
The 'Enable the next-generation Java plugin' is available in Start > Control Panel > Java > Java Control Panel > Advanced > Java Plug-in. This option can be modified only on 32 bit JRE.
To view the behavioral differences between JRE 6 and JRE 7, the following applet can be used: