Robocode only just now moved from requiring Java 5 to requiring Java 6. =) But I guess it's using your local Java 7 and doesn't have an option to compile for Java 6? I compile through Eclipse myself with robocode.jar in my build path. A Java 6 compatibility option in Robocode itself sounds like something that should be added if it's not there.
I think the best way to get setup is at RoboRumble/Starting With RoboRumble. The "superpack" has the rumble client correctly configured and a good base of bots to minimize what the client needs to download. Just post if you hit any snags and someone should be able to help you out.
And thanks! But I wouldn't mind if Diamond were 0.2 APS nicer. =)