You should update to Mendix 4 if you want to use Java 7. Automatic updates of the JRE are not recommended even for minor versions, there may be other dependencies so it should be a deliberate choice. For example there was a bug in Java 6 update 28 in combination with Microsoft SQL Server. For a major update like this it definitely shouldn't be done automatically.
We do recommend updating to the latest Mendix and Java version of course :)