Try just appending your JDK path stuff to the other path line, so it reads thusly:
SET PATH=%PATH%;C:\PROGRA~1\NETWOR~1\PGP;C:\JDK1.2.2\BIN
Then, put an "REM" in front of the line that says:
PATH C:\JDK1.2.2\BIN
So it should read:
REM PATH C:\JDK1.2.2\BIN