Here's a quick explanation of what just happened: 

Problem 1	-	Azureus dependencies can't install
			Because java-check-environment is reporting a bad environment
			Because you don't have a java developer's environment installed (a jdk)

Solution attempt-	emerge -av sun-jdk
			This installed a current jdk on your system (java 1.5, a generation 2 jdk)
			
Problem 2	-	You needed a generation 1 jdk. (java 1.4* is a generation 1)

Solution attempt-	Tried installing a virtual/java-1.4
			This would have your gen-2 jdk pretend to be a gen-1. 
			
Problem 3	-	This didn't work. For some reason, the environment still wasn't okay ('sane' is usually the word used.)
			Java is pretty bad when it comes to changin major versions (1.4->1.5)
			
Solution attempt-	Install a real generation 1 jdk (1.4) as well as the current one (1.5)

Problem 4	-	java 1.4 wanted parts of modular X, not a single-file X. 
			This is because modular is more up-to-date (it's the way forward)
			
Solution	-	We told it to ignore any X dependanies with the USE="-X". 
			This shouldn't be a problem, as your primary java install (1.5) *was* built against X.
			In the long-term, you will eventually have to switch to modular-X. It's pretty easy, just follow the guide. 
			(Although more gentoo is probably the farthest thing from your mind atm... it can probably wait a few months ;)


What should happen:	'java-config-1 -L' - Should list the 1.4 jdk as the current one (have a * instead of a number)
			'java-config-2 -L' - Should list both the 1.4 and the 1.5 jdk, the 1.5 one should be current.
			
			java-check-environment will verify that you have both a gen-1 and a gen-2 jdk installed. 
			
Potential problem:	java-check-environment complains about PROVIDE files. 
Solution:		Delete the file it names (this is the 'virtual' we installed earlier)
			Run java-check-environment again.
			
			
			-> emerge -av azureus
					Happy days!


Hope that's cleared it up a bit - I'm off for the night. Good luck! 

(Oh, and RPM's are the devil. )