Instead of entering directly "java", you have to write the full path of "java".
It will probably be:

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C:\Program Files\Java\jre6\bin\java.exe

Then the command will become:

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"C:\Program Files\Java\jre6\bin\java.exe" -Xmx1024m -jar path/to/SweetHome3D-x.y.jar

There's an other solution, create a text file named SweetHome3D.l4j.ini in the same directory as SweetHome3D.exe, and write the following text in that file:

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-Xmx1024m

and relaunch Sweet Home 3D.