The WebStart issue seems to be mainly with Sun’s client.
I think using WebStart code/libraries to embed update capabilities in your game is the way to go. Have your self-contained game manage a private WebStart cache that only it uses. The embedded cache would come populated with the files for your game.
The thing I don’t like about WebStart is how applications are “lost” to the user after having been launched the first time. If they don’t make a shortcut on the FIRST launch then they have to go back to the web site to launch it again, because they have NO CLUE that the WebStart application exists and that it is a way to launch code they have already downloaded.