The question I have is; does the command line honor the windows variable?
Quite likely, not. The installation runs in the SYSTEM context when installed by the WUAgent, and as such has a very thinly defined environment.
I would suggest hardcoding that pathname to a known, permanent location accessible to the SYSTEM account, e.g. C:\WINDOWS\TEMP\jreMSI.log should work.
Thanks for the prompt reply Lawrence, much appreciated.