There have been reports that people have been encountering problems trying to run 3.2.x against 1.3.x JDKs so you may want to upgrade.
Also, there are various problems caused by running Java server software in directory paths that contain spaces. A lot of the networking, JNDI and RMI systems break. This is related to the underlying implementation of Sun interfaces that must co-operate with the native OS.
I would try those changes first. It would be easiest to move the installation first if you still want to try running under Java 2 JDK 1.3.x.