Make sure you have the proper directory defined under "Settings" -> "Project Settings" -> "JDK Location".
Don't use the JRE directory.
It should look like this for the version quoted: C:\Program Files\Java\jdk1.6.0_16
For mine (the latest as of March 4, 2011), it looks like this: C:\Program Files\Java\jdk1.6.0_24
HTH.