In Java Web Start 1.2, javaws.cfg (the configuration file) was loaded from two locations. One user-specific, and the other from the directory javaws was installed in. In this way, and enterprise deployment of javaws (on a nfs mounted drive) can contain configuration entries (such as nfs mounted java versions) aplicable to everyone in the enterprise.
In Java Web Start 1.5, the enterprise config file (deployment.config) is looked for first in the platform specific $deployment.system.home directory, but if not there, it will be loaded from the lib directory of the jre.
In Java Web Start 1.4.2 the system configuration file (deployment.properties) is only loaded from platform specific $deployment.system.home directory. If not found, none is used.
It should also look in $JAVA_HOME/lib/javaws, to provide the same functionality available with earlier or later versions.