Genesi has some people working on a JavaVM port to MOS. The project was actually started by Alan Harvenmost of Commodore Amiga fame... so its in the works
No, it depends on which Java version is supported. Apps written to use features of Java 1.4 won't work with a JRE for 1.3 etc. But most 1.3 apps will run with 1.3 and most 1.4 apps will run with 1.4 (there are still some idiots out there who don't know how to write platform independent stuff even with Java)