Yeah, I bet it totally is. From that same command line, try typing:
And hitting return.
If that returns something then I wonder what evil thing has set the JVM options that way.
The response is:
_JAVA_OPTIONS=-Xmx256m -Xms256m
Ok, that right there would seem to be the issue and I sort of wonder how it got set... but anyway.
(I will assume Windows 7... this is actually a little easier on XP... and I'm no Windows 7 expert so hopefully I get it right...)
Go to your Control Panel.
We are trying to get the "System" panel which on my computer was under "System and Security" then "System".
From there on the left is "Advanced System Settings".
If all goes well then that should pop-up a window like this:

Click "Environment Variables..." down in the bottom of that window.
See if there is a _JAVA_OPTIONS entry and delete it. It might help to yell "DIE! DIE! DIE!" as you do it... but I may be over-investing.

The entry really serves no purpose anyway since it is just forcing the default maximum memory that is already there. And I'm sort of casting evil looks at Java for not letting the command line override those settings but still.
Hopefully that's where the options are coming from and you can nicely clean them and we'll have a happy ending to this story.
