Fist of all, Do you use remapped serverdrives?
This may be way off base (All of my Citrix knowledge is self taught from "hands on" admin and books):
Right click "My Computer" and go to Properties -> Advanced (tab), and then click the "Environment Variables" button. Look under "System Variables" and see if one is there called CLASSPATH (you could even create one if want to give it a shot).
Copy the paths that are in there to a text file, just in case this is wrong and you need to restore what was there. If there are multiple paths, you can seperate them with a semi-colon (you'll see what I mean). Put the path in there that you need (and leave any others that are there along with it!), and restart the appropriate services or reboot the machine. Sit back and see what happens.
I've written a fair amount of Java, and it seems like there's always something going goofy with the environment variables. I suspect that this is because Java doesn't really target any system in particular, so it makes no assumptions about the file-system structure of any machine.
Also- because this is a terminal server, I have no idea whether or not simply doing this as Administrator takes care of the problem, or if you need to put the machine in install mode or something similar.
Hope this helps.
please mark helpful if it seems to be that