I narrowed the problem to being when I called the Applet from Javascript within an HTML page in IE running jre 1.4.2
For example: document.myApplet.fromJS(str);

The applet in IE with 1.4.2 worked OK when called directly from the HTML.

I tried several codeBase= entries in the .java.policy file and could not find any that would work. So I gave up and added the FilePermissions to the global entry at the beginning of the file.

For example: The bottom 4 entries allowed IE to work.

grant {
...
permission java.io.FilePermission "E:/Testing/", "read";
permission java.io.FilePermission "E:\\Testing\\-", "read";
permission java.io.FilePermission "E:/Miscellaneous/SailJazz/", "read";
permission java.io.FilePermission "E:\\Miscellaneous\\SailJazz\\-", "read";
};

The following entries allowed NS with jre 1.3.1 to work:

grant codeBase "file:/E:/Java/Tutorial/-" {
permission java.io.FilePermission "E:/", "read";
permission java.io.FilePermission "E:/Java/Tutorial/", "read";
permission java.io.FilePermission "E:\\Java\\Tutorial\\-", "read";
};

grant codeBase "file:/D:/Testing/-" {
permission java.io.FilePermission "E:\\Testing\\-", "read";
permission java.io.FilePermission "E:/Testing/", "read";
};

Someday when I get inspired again, I'll try other codeBases to see if I can narrow it down.

Norm