Problems locating class File when Executing from RPG

Hi:

I am running into a problem that I can't see a solution to.  It has to do 
with visibility of a Java Class from multiple users.

For example:  I developed a Java app. in my home directory and it resides 
in '/home/MYDIR' on the AS400. 
(MYDIR) is my login name.  When I use qshell I automatically get placed 
into MYDIR directory.

The second user also has a directory in '/home' (set to their login name). 
 
We have given each other full permissions to each other's directory and 
also set the permissions on each file.
We set the CLASSPATH to point to the Java class located within my 
directory.  The second user can not access the class
and the RPG program fails with class not found error.  When we move the 
Java class into the second user's folder, the
RPG application runs fine.  From a Windows explorer the second user can 
see all the files in my directory and can copy them freely
into their own directory. (This indicates to me that they have sufficient 
permissions to see the files.)  We also checked the 
execution rights, and this was all setup properly.

We double checked that the CLASSPATH was set properly in the second users 
environment.
We have a third user, that does not have a directory in '/home'.  When 
this user sets the same CLASSPATH, the application
runs fine from my directory.

It almost seems that if a user directory exists in '/home', this overrides 
any CLASSPATH setting.  Has anyone else run into this.
We've been banging our heads on this to try a come up with a solution. 
We are running V5r2. 

Has anyone else also been able to set the default JVM to point to 1.42 
rather than 1.3 which is the default.  I've tried various solutions posted
such as setting the variable in system.properties but this DOES not work. 
The only solution I've found so far is to preface the JVM version on the
javac line.  (eg. javac -K=Djava.version=1.4  myapp.java).  This is a big 
pain in the butt to constantly have to type this in.

...Paul