alright i came up with a solution. i was under the impression that spotlight searches for the hidden file as well. i used thinkertool utility to identify .drjava file which was located in my home directory. the instructions in the documentation is not very clears on how exactly change the compiler version!
instead, i used the java preferences utility located in /Applications/Utilities/Java/J2SE 5.0/. from there i just had to change the order of java verstions that appls used in my system. before it was set to 1.4.2 then 1.5. now the order is the other way around and everything is working great.